Almost two decades as a long term care insurance specialist has given Debra Newman a keen perspective on just how far the advisory community has come in its overall acceptance of LTCI -- and just how much further many planners and producers still have to go for the product to gain momentum in mainstream America.
"If you were to walk into a room of 100 advisors and ask how many are active in long term care insurance, I think probably 98 of them would raise their hands, believe it or not," says Newman, president and CEO of Newman Long Term Care in Minneapolis, Minn. "But if you were then to ask how many are actually making money selling it, you would see most of those hands go back down."
Pose the money-making question to the same roomful of advisors a couple years from now and the result might be quite different, largely due to advances in LTCI product design aimed at making LTCI a simpler and more palatable product for advisors to sell and for consumers -- particularly baby boomers -- to purchase.
Led by the likes of John Hancock, MetLife and LifeSecure, insurers today are making a concerted effort to simplify LTCI products, pricing and processes so they're more advisor- and consumer-friendly. "We concluded that most long term care insurance products were just too complicated, too difficult and too expensive. There were too many decisions for clients to make and there were so many moving parts that advisors were reluctant to present it to clients," explains Gene Arsenault, regional vice president of sales for Hancock LTCI. "So we developed a much simpler product called Leading Edge and introduced that in 2006. I think we did it more for the advisor than for the client."
Leading Edge is among a new wave of simpler, more flexible products that Jesse Slome, executive director of the American Association for LTCI, calls "lifestage" policies because they allow policyholders to lock in coverage while they're younger and in good health (typically in the 40- to 55-age range), then adjust coverage as they age to reflect changing circumstances and risks on both the health and wealth fronts. (The sidebar on page 34 provides details on several such policies.) Largely because that kind of flexibility has been lacking in traditional LTCI policies, advisors have been slow to find a comfort zone with the product, observes Arsenault.
The apparent LTCI awakening in the advisory community is occurring in large part because the supply side of the equation -- insurance carriers and advisors -- are coming to several key realizations about what it will take to make LTCI a widely embraced product:
It resonates more with consumers when sold in the context of a broader plan rather than on a stand-alone basis. "I believe," says Newman, "that we have to make [LTCI] part of the planning process to make it an everyday solution."
Seniors aren't the primary candidates to purchase LTCI. "This is absolutely a baby boomer, pre-retirement planning product," insists Slome. "Agents need to turn their attention away from seniors, toward boomers."
The emphasis and impetus, particularly when working with boomers, should be to secure coverage at a younger age in order to lock in lower premiums. "The focus," says Slome, "has to be on health qualification."
The LTCI sale is not solely bottom-line-based. "Too often," says Newman, "advisors fall back on economic modeling and make this purely a financial issue. They fail to recognize the emotional part of the long term care equation -- the immense toll care giving takes on caregivers."
Selling LTCI to boomers takes persistence. "Many agents still subscribe to the 'I'll make one call or send one letter' approach with their clients. And if there's interest or not, that's it. But you're not going to be able to successfully market to baby boomers that way."
Boomers first and foremost want LTCI policies that provide them with choices and control of where they receive care, according to Slome, and they tend to have a strong preference for home care. The desire for control is one reason he expects cash policies to become increasingly popular.
Blended (or combination) products that couple life insurance with some form of LTCI coverage are gaining resonance among boomers who see wisdom in using permanent life insurance for the dual purposes of estate planning and LTCI coverage.
These realizations are evidence of the advisory community's "incredibly heightened awareness" about LTCI, says Newman. Still, certain segments of that community are behind others in their embrace of LTCI, says Slome.
Slome divides advisors into three categories with respect to their approach to long term care insurance: a minority of about 20 percent who are committed specialists; a similar share who don't even put LTCI on the table with their clients; and the middle 60 percent who may talk about the product with clients, but who haven't wholeheartedly committed to it as a planning tool.
Advisors who stand the best chance to succeed with LTCI are those who tend to take a broad, planning-based approach with their clients. Classically trained insurance professionals tend to do well with LTCI because they fully understand the risks it helps mitigate, says Newman. It's the purely transactional type of producer and advisor who tends to find LTCI most challenging, she adds, because their client relationships may lack the depth necessary to initiate meaningful discussions about the product. The advisory community as a whole, Arsenault says, "has been slow to find a comfort zone to talk about LTCI with their clients."
Carriers such as John Hancock, as well as specialists such as Newman, are working to help advisors find that comfort zone, having realized the advisory community is the gateway to mainstream acceptance of the product. To that end, Slome and Newman are encouraging advisors who want to get more involved in LTCI to partner with LTCI specialists until they develop their own prowess with the product. It's also crucial, says Slome, that advisors spend time learning the distinctions between the products offered by various carriers because "each company has its defined sweet spots."
Advisors also can turn directly to carriers such as John Hancock for support. In January 2008, Hancock unveiled a marketing tool kit to provide advisors with prospecting and sales support for Leading Edge. "We want producers to know [LTCI] can be an easy product to sell," says Arsenault. "I think we're all trying to get that message across to advisors."