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Why SC Residents Are Buying Layoff Insurance

Family playing at beach

Originally Published by The Greenville News on Aug. 10, 2018

By Anna B. Mitchell

“SafetyNet” has spread to nine states this year, and its creators want to expand to all 50

An insurance product newly arrived to South Carolina is tapping into worker uncertainty that persists in America’s booming economy.

SafetyNet, a type of private unemployment insurance, offers lump-sum payments ranging from $1,500 to $9,000 to customers who have purchased policies costing anywhere between $7.50 and $45 a month.

The product, which has expanded to nine states this year, draws praise from customers looking for assurances they will be able to keep paying bills for a couple of months should their income cease. At the same time, SafetyNet’s rapid expansion spotlights the thin line between comfort and crisis among American families.

Across the nation in 2017, despite a soaring stock market, unemployment at or below 4 percent and gross domestic product approaching $20 trillion, four in 10 Americans did not have enough cash in hand to cover an unexpected expense of $400, according to the Federal Reserve.

This Fed stat formed SafetyNet’s business model, said the company’s director and head strategist, Mark Greene.

“It’s shocking. That’s almost half of Americans,” Greene said. “Sixty-nine percent of Americans don’t have $1,000 saved; 33 percent have zero saved.”

Lingering uncertainty

When forming his company two years ago, Greene and his team, which operates under national credit-union insurer CUNA Mutual, explored products that he said could give “working people peace of mind, people working paycheck to paycheck.”

The insurance appeals to new customer Laurie Miller, who has seen her American dream come crashing down before.

In 2006, the Fort Mill resident was fresh out of college, landed a great job in Florence, bought a new house and got a new car, too. Then the economic recession hit.

“I ended up getting laid off because, you know, low man on the totem pole,” Miller said. “I lost everything.”

Miller’s marriage fell apart, and she was living in an 800-square-foot apartment with her two children at one point. Her children’s daycare, which she needed to keep working, cost three times as much as her rent, she said.

“People who live with that, it never goes away,” Miller said. “So many people lost so much. Their lifestyles changed so dramatically in a matter of a couple of years.”

Miller and her second husband, Richard, have both signed up for the $15 a month plan, which promises a $3,000 payout if one or the other of them is laid off or cannot work due to an injury or illness.

“I saw it on Facebook and thought, ‘That’s a good idea,'” Miller said.

For a basic plan — $7.50 a month for a $1,500 payout — someone would pay premiums for about 17 years to equal the amount of a claim.

Hans Blake, a financial adviser in Greenville, said consumers should be wary before buying any insurance product, bearing in mind all conditions written into the policy and whether it’s financially worthwhile in the long run. Workers should also weigh the likelihood they will get laid off or suffer from a qualifying injury or illness in the course of 17 years or consider savings, he said.

“I feel like insurance companies are very tight when paying out,” Blake said. “Their purse is wide open when you are paying the premium.”

Blake’s advice: sock those monthly premiums into a savings account or secure investments instead.

“From my perspective, this is preying on those same people who aren’t able to save,” Blake said.

Miller said she has opted for savings and SafetyNet.

Rapidly growing

Earlier this year, South Carolina became the third state nationwide, after Wisconsin and Ohio, to allow SafetyNet to sell policies within its borders. Since then, SafetyNet has launched in six more states (Missouri, Michigan, Georgia, Colorado, Oklahoma and Mississippi). The company has plans to expand rapidly across the rest of the United States, spokeswoman Abby Duke said.

“We can’t provide specific numbers, but SafetyNet is protecting the income of hundreds of workers across South Carolina and thousands nationwide,” Duke said.

The company, which is advertising heavily on Facebook and television, lets customers sign up online with a credit card and a few questions targeting eligibility. “Your bills don’t care if you lose your job. But we do,” the company touts.

Ray Farmer, director of the South Carolina Department of Insurance, said SafetyNet is among a range of online, direct-to-consumer products — many of them coming out Silicon Valley — called “Insurtechs” that have emerged in recent years.

The bronze bull statue, Wall Street’s icon of prosperity,
The bronze bull statue, Wall Street’s icon of prosperity, sits in place in New York City’s financial district, Monday, June 23, 2008. (Photo: Mark Lennihan, AP)

“Technology is changing a lot of industries,” Farmer said. “The insurance industry will be one of them.”

Customers follow five steps online to apply for a SafetyNet policy — providing basic identification, credit card information and login details. The application also asks if an applicant works at least 20 hours a week, participates in a union, has been told already that he or she will lose a job and whether SafetyNet replaces any current accident or sickness insurance.

“It’s the consumers job to understand what the product is, to be comfortable with it and to handle a need,” Farmer said.

SafetyNet itself is part of an 84-year-old parent company, CUNA Mutual, that Farmer said has been approved to do business in South Carolina for years. CUNA Mutual primarily serves credit unions, offering consumer and commercial insurance products.

“They meet all our financial requirements,” Farmer said. “They have a good track record.”

‘Backup plan for a backup plan’

Brandy Spears of Elgin, South Carolina, saw ads for SafetyNet on television and Facebook. Signing up for her policy — $30 a month for a $6,000 payout — was easy, she said. A single mother, Spears has worked in law enforcement for nearly 20 years.

“At any point something could happen,” Spears said. “You have to have a backup plan for a backup plan.”

Some customers, like Miller, have experienced job losses before.

“I still have $40,000 in debt from that time,” she said.

Others, like Brenda Rogers of Abbeville, work in jobs that are hard on their bodies. Rogers is a licensed practical nurse at a nursing home and is on her feet all day.

“I’m going to have to have double knee replacement, and I know I will be out of work for awhile,” Rogers said.

Miller said her husband, Richard, works in the road-construction business and is also prone to injuries — including a back injury in January. He has worked for four different companies over the past decade and witnessed several rounds of mass layoffs.

With this level of risk in mind, Miller said she hesitated to accept a new job offer from a recruiter earlier this year even though it was more money and advanced her career.

“My husband said, ‘We’ve got that SafetyNet thing. Take it,'” Miller said. “This new job is the best one I’ve ever had. I absolutely love it. I probably would not have taken had I not had something.”