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The Get Ready Money Podcast
Get Ready with Maxwell Schmitz: The Impact Of Covid-19 On The Insurance Industry
"It’s a very fluid situation. 90% of financial services institutions had a pandemic response ready. From a broad scale perspective, the financial stability portion is not a concern as this time." - Maxwell Schmitz
"Everyone has a plan, until they get punched in the mouth." - Mike Tyson
In this episode, I spoke with Maxwell Schmitz, the Insurance Resource for Certified Financial Planners about the impact of Covid-19 on the insurance industry. We discussed the impact of Covid-19 on the application process, underwriting and claims along with how this could change the industry in the future.
Connect with Maxwell Schmitz:
LinkedIn: Maxwell Schmitz (here)
Website: DI & LTC Insurance Services (here)
Bio:
Maxwell Schmitz joined DI & LTC Insurance Services as a third-generation DI specialist in the bottom of the recession in 2009. Since then he has developed a specialty in working with CFPs and RIAs to consult and implement proper disability planning for their clients. Max and I also co-authored The Questions and Answers on Disability Insurance Workbook
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Well,
Speaker 2:Welcome to the get ready podcast in partnership with insurance nerds, I'm pleased to be joined again today by Mack Schmitz. In this episode, we'll be discussing the impact of COVID-19 the Corona virus on the insurance industry. Max joined I and LTC as a third generation GI specialist in a bottom of the recession in 2009. And here we are again, max, welcome to another session.
Speaker 3:Hey, how are you, Tony? Yes. Thank you. I would like to say happy to be here, but in that context, not so much.
Speaker 2:Yeah. Well you, you, you've learned a lot and you bring some great lessons, so it's great to have you back again.
Speaker 3:Thanks a lot. Yeah, no, good to be here.
Speaker 2:So just a little bit, um, about Max's he developed a specialty in working with CFPs and RIA to consult and implement a proper disability insurance planning for their clients, max and I also coauthored the questions and answers on disability insurance workbooks. So max, let's dive on in. Um, can you tell us just a little bit about what you do?
Speaker 3:Yeah, so I essentially advise advisors, um, is really what it comes down to. So work with a variety of advisors, insurance advisors, like you mentioned, RAs and CFPs who just have a broader holistic, um, sort of, uh, value operation that they bring to their clientele and in doing so, you know, a lot of them have questions about the disability insurance. Certainly can't be an expert on all things. And so you gotta rely on experts in one specialization and that's me on the disability income and also the long-term care side. So that whole broad disability spectrum is really where we sink our teeth in and can help build case design, um, even help with some marketing prospecting, identifying viable, um, opportunities in that space and helping clients, um, stay protected and, and give them income streams when they need them most
Speaker 2:Fantastic way. I know you've been a great resource for me, uh, when I was doing some consulting. Uh, so you're doing some great work. So, you know, let's dive on into the subject. Matter of the moment is what's going on for insurance companies right now.
Speaker 3:It's a, it's a very fluid situation, as I'm sure everybody can sort of anticipate. Um, you know, I was encouraged to see a statistic the other day put out by Munich re that 90% of financial services institutions had a pandemic response ready. Um, fantastic. It didn't really feel like it, their communications, you know, it, it financially is, uh, from a stability standpoint. I think they're, they're all good. They're obviously I'm not looking at the balance sheets of everyone, but, um, from everything we've been hearing, I mean, this is the financial stability portion is not a massive concern at this point in time. You know, I'm not speaking for every carrier, but, um, just from a broad scale perspective, it looks like, you know, they've planned for this. Um, but as far as communications go and, um, rule changes and things like that over the last couple of weeks, a lot of them have been pretty slow to respond. Um, meaningfully of course everybody's said, Hey, yeah, we're going to do what we need to do for, to keep our employee health and everything like that in good order, which obviously is the bare minimum. But, um, you know, as far as what they're going to do with extending grace periods and underwriting changes because you can't schedule an exam, uh, if your life depended on it, in some cases here in California. So we've got, um, a lot of changes that came pretty quickly and, but also sporadically, you know, it was just sort of like things kind of popping in the air, um, trying to see where they all lie and they haven't been equal, which is sort of interesting.
Speaker 2:Definitely. You know, I think that's, what's interesting and I think that's going on overall with everything I feel for you in my personal life, that everything from my son's school to everything else, it's been, boom, boom, boom. And you know, that people are just starting to get a sense of how our lives are going to be for the next few months. Um, and, and it's probably what's going on with the insurance companies. Is it, what's the saying is, you know, everybody's got a plan until they meet the enemy, something like that. Have you heard that?
Speaker 3:Yeah. Or the, my ice and one got a plan until you here.
Speaker 2:Yeah, that's it? Yeah. I love that. And that's it.
Speaker 3:I mean, we're all trying to figure this out together.
Speaker 2:Definitely. So, you know, let's, let's talk, uh, you know, let's, let's break this down just a little bit is how is it impacting, uh, the underwriting process right now?
Speaker 3:So on the bright side of the spectrum, I would say, you know, w we're seeing some really aggressive and I think welcomed responses to this, um, couple of carriers sort of came out, boom boom with, um, with and met pretty similar guidelines where we're looking at, uh,$10,000 a month for individual disability insurance with no exams, no labs. Um, so it's a, it's a much more streamlined as we say, non med or simplified issue process. Um, you're still looking at APS is in many cases, and this is on the life insurance side to you. You're seeing, um, they're going to waive those exam conditions if there is, if they can find blood work within the last 18 months within your medical records. And if not, they're still going to have to schedule the exam. So the devil's in the details, but, um, with regard to the DIA it's 10,000 a month, right. Uh, with no exams out the gate, and that's all ages for some carriers, other carriers are imposing restrictions based on age. So you're seeing maybe a maximum of 6,000 a month for anyone over the age of 45. Um, but, uh, all in all, you know, it really comes down to what the application looked like, looks like. So if they can answer those medical questions or the Tel app questions, um, cleanly and without much, um, that much medical history, then I think you're going to have a lot better chance of getting all the way through without an exam. Um, so definitely be sure to pre-qualify is the name of the game. But, um, aside from the individual disability insurance, I've actually been really encouraged to see what they've been doing with the business products as well. And these domestic carriers issued the$10,000 max on the non med for individuals are also showing$25,000 a month, non med for business overhead expense. And I think that's a, that's really a special, um, uh, maybe this isn't coming out the perfect way, but it's sort of a special pain point right now, I think is we're seeing small business landscape just sort of crumble. Unfortunately, obviously this is incredibly dire time and you have to be especially careful with how you're introducing these subjects, but, um, at the same time, you know, it's so evident how dependent we are on a basic income stream. And what happens when you can't, um, maintain, you know, your regular expenses, um, due to, I mean, obviously our policies don't pay in the event of pandemic, unless there's going to be a diagnosis. I think we'll talk about that in a second, but, um, but you know, you can equally see this, you know, uh, you know, a non COVID situation where the business owner or the Rainmaker of a small agency or a dentist office or something, or a veterinarian's office, um, is no longer able to participate in the day-to-day because of, uh, you know, cancer diagnosis, um, back issue, something musculoskeletal or anything else like that. So there's, you know, there's not just one, you know, pandemic insurance, but, you know, we need to be thinking broad scope of, right, what are, what are some of the dangers to this business from operating in? It comes down to, you know, disability scenario and, and BOE can really help. And then the third one was, um, the buy-sell coverage and not a lot of people have buy, sell insurance on their disability risk, but as you know, a lot of them have buy-sell agreements in place, a lot of partnerships. And those that do typically have a disability clause where you have to fund it in the event of a permanent total disability for your partner, um, if they become disabled. So, uh, this is a funding mechanism, and now we can get a non med insurance up to, um, up to a million dollars for, by cell cases in, in the United States. So pretty, pretty special time in a way, but, um, obviously don't like the circumstances around it, so yeah.
Speaker 2:Yeah. Well, I think you have the plus minus, you know, I think people are aware of the need, but at the same time, you know, the question is paying the premiums or taking on a new financial obligation is it's a big balancing act. So, you know, to drill down on the underwriting, um, you know, over the years I've heard different things like, you know, that over a 10 year period, that the results of the medical exam don't really matter that much, that underwriting has become much more complicated. Do you think that some of these things that are being implemented since the carrier said, we're only to do them so quickly, do you think that some of these changes will be permanent?
Speaker 3:That's the hope from a distribution side? You know, it, we want to really disable as many barriers as possible to this process. Um, people need the stuff first and foremost. And so the more obstacles we put in their way, obviously the fewer cases we're going to be able to get, where we can actually help somebody and, and deliver impact. So, you know, I would love to see it go away from that standpoint. I, you know, don't have the depth of knowledge on the underwriting side to really understand when and where exams are super important. I think they would, um, you know, I think they serve a purpose for sure. I mean, especially somebody who hasn't seen a doctor in five years and has some medical history, something like that, this is an easy way to get a checkup checkup without actually going to do a physical checkup with a doctor or something like that. So there's a purpose for them. Um, but you know, if somebody has everything in their records and certainly we're going this way with EHR, electronic health records and stuff like that, I mean, it's all there. Like there's really, we're getting an also you're asking application questions too. So you're getting that information once with the application twice with the exam and labs three times with the medical records, it's like real, and then there's an MIB check too. So how many times do we need to collect the same information? Yes, there are disparate, uh, you know, differences and things like that disparities within the reports. But, um, I think we have a pretty good collective picture with just the MIB, the app questions and the, um, medical records already. So I'm, I'm hopeful. Um, you know, or I should say, yeah, I'm hopeful, but not overly optimistic in that.
Speaker 2:Well, you know, actually, it's you, uh, talked about that. I was just thinking about over the years, how many times I've had a client, who's had an underwriting complication because of something that's arisen in an exam, as opposed to how many issues have arisen because of something in their medical records and pretty much everything I can think of that's coming to mind. It's been medical records. I mean, is that what you guys experience when you have, um, clients who don't get policies approved? Absolutely.
Speaker 3:I mean, that's, it always comes down to something that was tripped up in the medical records and, um, you know, something the client forgot about because it was so minor. Um, or there was some follow-up testing that just never happened because it didn't feel like an issue or is this something they could easily live with? Um, so, you know, that's usually where you see the, the trip, it's never an exam. So it, I guess, to your tenant, to the opposite point, an exam can sometimes clear somebody when there is a question about their medical history, so it can be there to support the client's case. And I think that that might be the way to view it going forward is okay, well maybe we can just run a quick exam to sort of clear the air on this particular issue, but to make it, the default seems like overkill to me. And I hope that that's got a little bit of residual, um, you know, staying power after this is all said and done. Um, we can keep some of these practices in place.
Speaker 2:Definitely. One of the other things that I've noticed is that insurance companies, all of a sudden have turned flip the switch on for a lot of, uh, the electronic component of gathering applications, issuing policies. Uh, do you see that overall with multiple carriers that all of a sudden they figured out that you can use DocuSign for things?
Speaker 3:Oh my gosh. Yes. We've been, you know, we've been beating the drum together, both of us for years on getting just an e-signature, you know, the viability with some of these characters and we 2020, or I should say probably end of 2019 was a huge benchmark year for us in that, in that sense, because now we do have multiple carriers on the DIY side that are finally able to accept e-signatures. Um, DocuSign is really the main one. Some of them are still limited to just DocuSign. Um, but you know, we're good with that. We'll take what we can get. It was took enough sweat and tears to get to this point. So we're, we're talking it up as a win. Um, but the delivery stuff, you know, it was funny. Some carriers started with that before they opened up to apps and e-signatures so, um, there's a few of them put the cart before the horse in that respect, but we, um, yeah, we've seen, we're seeing the delivery on with pretty much all of our GI carriers right now. I'm trying to think if there's any exceptions, um, um, none really come to mind right away, but, uh, LCC side is still slow on the uptake on that front, but, you know, they'll manage, uh, the one key piece that I am missing through this process is the, um, the electronic APS fulfillment, um, that has just not happened. They've got, um, some, some really, um, analog gatekeepers on that front. And that barrier is just getting torn down. We've got some pilots going on right now with Dai carriers that are using this electronic health record platform through a service called human API to collect that data. Um, and that's bringing, uh, I literally just had a three month APS, took three months to get it from a big medical facility here in California. Um, and they could scale that down to two days. So, I mean, that's massive for clients in terms of just keeping business flowing and, and headaches away from our clientele. So,
Speaker 2:Yeah, definitely. So, well maybe, you know, from that standpoint, this could turn out to be a good thing for the industry is that the industry could find out that, Hey, you know, some of these things aren't going to hurt and we can actually view some of them. So it's exciting. So, you know, w we've only got a few more minutes, um, I think the other big issue, and you touched on it briefly is, you know, what's going on with claims for DEI and LTC and from the life side.
Speaker 3:Sure. I mean, it's, it's, it's so interesting to have this conversation because I feel like one of the Achilles heels, one of many in the DEI realm is that, um, it it's been a gray area, um, in terms of how claims are processed. Um, there's not a whole lot of clarity from a consumer standpoint and just in the general populace. Um, and that's because every disability is a dynamic situation in this particular setting. Um, that's a good thing because, you know, it's one thing to have a list of, of codes and medical conditions that get paid out in health insurance. And that's how I would love to see disability run in the future. You know, if you get a diagnosis, you enter this code, which is from, you know, the medical billing team or whatever, and then they pay out a claim based on the full fulfillment of the code. So you can put it all on the blockchain. Um, that would be ideal so that you just re exercise, you know, claims culture completely. Um, but instead, now we're looking at a situation where you've got, okay, COVID-19 it doesn't really that, that means different things to different people based on your health history and things like that. So, uh, or you could have a compromised health history and walk away in a couple of days and be just fine. Meanwhile, we have people with maybe one or one thing going on and, you know, they're unfortunately not going to make it. So there's just a massive array of how this can really go down. And, um, with regard to disability insurance, it's based on your ability to do your job at the end of the day. And if you can't do it, if it's because of coronavirus or if it's because of Ms or if it's because of a shoulder issue, um, it depends what your occupation is, but if you're limited due to your medical diagnosis, then the claim should pay. Um, and you know, every case again is different. So you've got to go through the claims process, but, uh, at the same time, you know, that's what this stuff is for, is to protect you if you can't work due an illness or injury.
Speaker 2:Definitely. Now that that's really interesting to know, because I, you know, I've heard different things about, you know, like this is covered, this is not covered. I think you mentioned earlier that pandemics are not covered under certain contracts.
Speaker 3:Uh, so they are, I mean, just in terms of being quarantined, um, if you're under quarantine and you're not sick or anything like that, there's no, it wouldn't just pay for a pandemic. Um, you need to be suffering and an income loss due to a diagnosed illness or injury. So if you have Corona virus, um, if you are suffering the effects of that, and you've got a diagnosis from a medical team, then I would say, start, if you can start the, um, the waiting period process, get the claim going. Um, you may be recovered with before your waiting period ends. That would be a good thing. But, um, there are complications from this too, is what we're seeing. So, I mean, it's still new. Um, so there's a lot to be, uh, left on fold, but at the same time, you know, it, it pays to get a jump on it and ensure that you're doing the right thing for your family or your business to keep the income stream coming.
Speaker 2:Fantastic. Well, so we need to wrap up, um, you know, we can, I think probably we, it would be great to continue this conversation on another podcast episode. Um, so where can people learn more about you and what you're doing?
Speaker 3:Yeah, so I think LinkedIn is probably where I'm most active right now. Uh, you can find me at Maxwell Schmitz, um, and I would say, you know, our website is always a good resource for information, and we'll be even more as we gear up for disability insurance awareness month, where we're going to build out a nice campaign of videos, um, digestible videos. That's the name of the game these days is making sure we can, we can sustain interest around disability insurance for, for 10 minutes. It's a harder task than it even sounds so.
Speaker 2:Oh yeah, that's true. No, not top of everybody's list. Well, max, thanks again for joining me. It's been a pleasure to have you on. Thank you. Yeah. And thank you everybody for listening to the get ready with Tony Stewart podcast, please be sure to subscribe. See you next time.
