Disability income: Filling the gaps in traditional coverage
Petersen International Underwriters delivers solutions for challenging risks
By Elisabeth Boone, CPCU
Some people choose their careers, and for others it seems that a career haschosen them.
That was the case with W. Harold Petersen, RHU, founder, chairman, and president of Petersen Inter-national Underwriters, Inc., a coverholder at Lloyd's that provides disability income, personal accident, medical, life, and contingency insurance to a wide range of individuals whose needs go beyond the coverage available from traditional carriers.
In the 1930s, while Petersen was growing up on his family's dairy farm near Council Bluffs, Iowa, his father became disabled and for several years was unable to work. The family lost the farm, and the elder Petersen was forced to take a job as a janitor.
The devastating consequences of his father's experience gave rise to Petersen's determination to share his story widely, and he has made it his life's work to help as many people as possible protect their incomes from the ravages of disability.
"I had intended to become a journalist," Petersen says, "but the people at the newspapers where I interviewed were not too kind. They said I could work for them but not get paid for the first six months, and then if they liked me, they might offer me a job. I was not in a position to accept that kind of offer. My wife, who was employed at Mutual of Omaha, encouraged me to interview there," Petersen continues.
"I had no knowledge of insurance, nor any sense that I actually wanted to be in the insurance business. But I joined the company, and it was there that I learned about disability insurance and began to think about how it would have helped my family. Although this was not my intention or desire, it became a crusade for me to tell people about our experience and help them protect themselves from a similar experience," Petersen explains. "It is our commitment to creating disability insurance solutions that has propelled Petersen International through the various chapters in its development."
Petersen joined Mutual of Omaha in 1948 as an underwriter, and in 1950 he created a special risks department using Lloyd's of London as a reinsurer. In 1956, he established an accident and health division at American United Life Insurance Company in Indiana, and in 1960 he led a group of investors to form Underwriters National Assurance Company, a disability insurance carrier.
In 1967, Petersen and his family moved to California, where he established Petersen International Underwriters (PIU) in Los Angeles. Today, at age 83, Petersen remains energetic, focused, and actively involved in the management of the firm, assisted by three sons, two granddaughters, and six grandsons.
Son Michael B. Petersen, RHU, joined the firm in 1974 and serves as vice president and chief underwriter. Son Mark S. Petersen became a partner in the agency in 1983 and is vice president of marketing; he also is responsible for the underwriting of special use life insurance plans as well as product design and development. Son Thomas R. Petersen, MBA, RHU, joined Petersen International in 1986. As vice president and chief information officer, his duties involve product development, industry liaison, legal counsel liaison, and national association representation.
Petersen International is licensed in all 50 states, the District of Columbia, and Canada, and it is contracted with a number of syndicates at Lloyd's to underwrite and custom script disability, medical, life, accident, and contingency insurance. Since 1982, Petersen International has placed business exclusively at Lloyd's, and it distributes its products through some 4,100 retail agents and brokers.
Solutions for many needs
"As traditional carriers have pulled away from writing disability insurance, we are able to use our relationships at Lloyd's to strengthen the industry as a whole and our offerings in particular," Harold Petersen remarks. "Those relationships give us more power and influence in the market, and as a coverholder at Lloyd's we've been granted the power of the pen. We can do virtually everything that an insurance company does except for retaining the risk."
The principals of Petersen International Underwriters emphasize that they seek not to compete with providers of traditional disability, life, and accident and health insurance and related products but, rather, to fill in the gaps that may exist in these coverages. Beyond that, Petersen International works with Lloyd's to arrange coverage for individuals who are uninsurable in the standard market because of health, occupation, location, or other factors.
On-staff medical professionals review and evaluate applicants who have health issues, and PIU often is able to place coverage for individuals with mental and nervous disorders, heart and cardiovascular conditions, height and weight issues, kidney and liver problems, diabetes, hepatitis, and drug or alcohol issues.
Persons who engage in certain occupations and/or whose income is inconsistent usually have trouble obtaining disability income protection in the traditional market. Petersen International will consider most occupations, including actors, artists, college and professional athletes, fishermen, loggers, offshore oil workers, pilots, ship's captains, stunt people, and writers. PIU also arranges high-limit or excess disability coverage for higher income earners and for individuals like real estate developers whose income is earned as capital gains rather than salary.
Other situations for which Petersen International can offer solutions are people who work overseas, those who work an unusual number of hours per week, persons who work from home or in a family business, and individuals who work overseas or in a war zone.
Many people who earn their living in ordinary occupations have hobbies or avocations that place them in a high-risk category for traditional disability insurance. Petersen International considers a range of avocations, including amateur racing, base jumping, demolition derby, helicopter skiing, rock climbing, scuba diving, and skydiving.
For a variety of reasons, a large and growing number of people over age 60 are continuing to work beyond the traditional retirement age, but many are unable to maintain disability income insurance with traditional carriers. Petersen International will consider arranging coverage for working persons of almost any age.
Business situations for which Petersen International can provide disability income solutions are buy/sell, key person, terminated employees, bank loan repayment, business overhead expenses, buy-in coverage for individuals who have been invited to become partners in a professional practice, and pension completion plans. PIU's Top Hat plan provides additional benefits of up to $10,000 per month with no medical underwriting to individuals who are covered under a fully underwritten traditional disability plan.
Petersen International also offers a wide array of life, accident and health, temporary medical, and contingency insurance as well as kidnap and ransom coverage and insurance for special events.
A family affair
As mentioned earlier, Petersen International Underwriters is proud to be a multi-generational agency with key positions held by Harold Petersen's sons and grandchildren.
The grandchildren represent the third generation of Petersens.
Scott Petersen, the eldest grandson, has been with the agency for more than 10 years. He heads up the professional athlete department and also is in charge of the information technology operation.
"We write over 600 personal disability policies per year that indemnify players for loss of potential future earnings under key portions of their contracts," Scott says. "That can range from total disability to loss of ability to perform in their sport.
"There is virtually no sport that we can't cover," he comments. "We've even insured bull riders. Right now the market is willing to take greater risks than it has in the past, so we can insure participants in extreme sports and X Games."
In addition to professional athletes, Scott says, "we cover some amateurs and college players. Coverage for college athletes is usually based on the potential for loss of future earnings as determined by their projected draft rating."
Commenting on current trends in the market for athletes' disability insurance, Scott says, "Recently we've seen a significant increase in the coverage we arrange for professional teams, which traditionally has not been a big market for us. The reason for this growth is the higher salaries and guarantees that teams are offering, as well as the length of their contracts, especially in hockey. That creates a higher liability exposure that the team needs to cover."
Kurt Petersen joined PIU in 2003 and is the youngest person ever granted the pen to write kidnap and ransom insurance, says his uncle, Mark Petersen.
"We have the pen for a number of different product lines, ranging from disability, medical, life, and accidental death all the way to kidnap and ransom," Kurt explains. "Many of those coverage types cross over, so what begins as a kidnap and ransom case can become a medical or an accidental death case. It's to the insured's benefit for us to offer all of the different product lines.
"We have in-house authority to quote, underwrite, and issue policies for all of those coverage types on behalf of underwriters at Lloyd's," Kurt continues. "We have in-house medical directors who can evaluate applicants and identify health issues, as well as financial underwriters who are CPAs. Having these specialists on staff allows us to thoroughly assess and underwrite each risk."
Grandson Jimmy Petersen is responsible for training at Petersen International and focuses on the application of an array of online tools. "From the time that my brothers and cousins and I came on board, we've been taught the importance of personal relationships among our coworkers," he says. "We're all trained in what's referred to as 'the Petersen Way,' which means going above and beyond in everything we do.
"A case might be small, but the loyalty we build and the service we provide come back to us tenfold, from the individual insured and from new cases that result from referrals," Jimmy asserts. "I try to optimize the company's performance in terms of technology. We've developed a variety of online tools that are similar to what carriers use. One tool we created allows for online issuance of policies for products that we underwrite via the Web. The insured can purchase the policy and print it out and have coverage in effect as of the next day. We use this tool for travel medical coverage as well as accidental death and dismemberment," Jimmy says. "The turnaround time is rapid, even on policies with substantial limits."
Another tool is an online payment system that allows Petersen International to process monthly EFT and credit card premium payments. "We created this system from scratch, and we're really proud of it," he says.
What's more, Jimmy adds, "The Producer Zone on our Web site allows producers to track their submissions and commissions, view policy and payment details, and even track the activity of their sub-producers. We're currently testing direct deposit of commissions, and that will be a valuable benefit for our producers."
With obvious pride in his voice, Mark Petersen says of the third generation, "Our 3 G's are finding ways to use technology to simplify and streamline processing and bring the excess-surplus market up to speed. For example, Lloyd's traditionally has accepted only annual premiums, and that doesn't always work for the insured. Our young people have developed programs like the monthly payment system to help us be more consumer friendly. Domestic insurers have offered these options for years, but the E&S market has been slower to adapt, and we're committed to improving the situation for our customers and underwriting partners."
The heart of the matter
Improving situations, in fact, is at the heart of Petersen International Underwriters' mission and operating philosophy as articulated by its founder, W. Harold Petersen.
"We have not tried just to build a business; we have tried to help build an industry," Petersen declares. "We have always supported the industry organizations, both financially and by serving as executives and committee members. The disability insurance business has a proud history, and we are committed to continuing that tradition."
For more information:
Petersen International Underwriters
Web site: www.piu.org