Louis Gosselin began his career in the special risk field in 1974 and worked as an underwriter for three different insurance companies, until he formed his practice in 1988. He worked mostly with high income earners in the sports, leisure, corporate and entertainment industries, traditionally difficult classes of risk mostly handled by Lloyd’s.
Over the years, he convinced his underwriters at Lloyd’s that the same principles of disability insurance covering a person’s own occupation could be extended to doctors, lawyers and heads of corporations, especially when looking at disabilities of a permanent nature where a lump sum settlement comes into play.
What are challenges that high net worth executives and professionals have when it comes to disability insurance?
Group insurance has a low ceiling for maximum monthly benefits and, to some extent, so does individual insurance. Someone in need of $20,000 per month in benefits will simply not find those kinds of high limits in the domestic marketplace. The other challenge is to secure a definition of disability covering the inability of the person to engage in their own occupation. In general, that is only available for the first 2 years of disability under group insurance but is commonly available under individual plans.
Since most high net worth individuals have some level of disability insurance and can carry the cost of a short term disability, we often concentrate on lump sum payments in the event that, after 12 months of the onset disability whether through accident or sickness, the disability is deemed to be permanent and beyond hope of improvement, thereby preventing the insured person from permanently engaging in the main duties of their occupation. This is often referred to as PTD or catastrophic disability coverage.
How does Lloyd’s plan compare to traditional disability plans?
This plan is, to our knowledge, unique to Lloyd’s especially since we can reach limits of multiple annual income from five to tenfold depending on age and maximum amounts of some $80,000,000 per person. Our PTD contract has a rather broad definition of disability. Many other policies state that you need to be prevented from engaging in all the duties of your occupation or simply from engaging in your own occupation. While our policies clearly state that you simply need to be prevented from engaging in the major duties of your occupation.
In regards to our PTD contract, we don’t have a clause which states that you must not be earning compensation or profit from any other source or that the benefits are integrated with any other benefits the claimant might be entitled to. The client qualifies, buys the coverage and if the peril occurs, we pay. As an example, if the client is a surgeon earning $500,000 per year and is unable to perform surgeries anymore, yet still able to go on to teach and earn $250,000 or more per year, he or she would still be entitled to the lump sum benefit.
One great benefit found in most individual policies is a guaranteed renewable clause which, by nature of its structure, Lloyd’s are unable to offer but we have designed an easy three year renewal process involving a simple declaration of health.
Can Lloyd’s plan supplement a traditional disability policy and how would this work?
Our plan can indeed offer a “top-up” to a person’s current disability plan. This provides monthly limits of insurance above what is provided by the primary disability insurer for a period of 24 months with the addition of a lump sum PTD payment at the end of two years if the disability ends up being of a permanent nature. The client needs to justify the sum insured, which can easily be done through their accountant, and we would never want to see a client receiving more than 65 per cent of his or her net income from all disability policies in place. Once the amount of PTD lump sum is established and justified, (3 to 10 times annual earnings depending on age) that is the agreed amount payable in the event of a claim.
Do other companies exist in Canada for this market and what separates Lloyd’s plan?
Many excellent domestic companies offer disability insurance, whether group or individual, but as we saw earlier, they have limitations. No domestic companies, to our knowledge, offer the high limits and the PTD lump sum concept we have detailed, with exception to Great West Life and Manulife who will only do it when there is reciprocal insurance in place such as in a partnership buy-out arrangement with limits not exceeding $2,000,000.
In addition to being a well know brand and fully licensed to transact insurance business in Canada for the last 75 years, Lloyd’s have a simpler and faster underwriting process than most domestic companies. Also, my 30 plus years of experience with them have demonstrated they care about their brand image in their transactions of hundreds of millions of dollars and they treat all clients with utmost good faith.
Do you have an example of where you insured a high net worth executive?
We have provided insurance to several key executives and professionals over the years either on a first party or a third party basis and age is an important factor when it comes to premium cost. We usually recommend that our clients proceed with a three year policy payable in annual instalments, thereby guaranteeing their insurability for three years at a time. As long as the client is healthy and can produce a clean declaration of health, we then cancel the policy every year on anniversary and re-write a new 3 year policy every year.
To give you a quick example, we recently had the situation of a three year policy written through a professional corporation for a 47 year ophthalmic surgeon earning $500,000 per annum as follows:
Lump sum CAD 2,000,000 Accident/Sickness Permanent Total Disablement 24 hour cover
12 Month waiting period
Annual Premium:
Year 1 CAD 9,500 Year 2 CAD 10,000 Year 3 CAD 10,750
