Long term care insurance programs for public sector workers are posing a dilemma for the LTC insurance industry: How to sell the programs and how to compete at the same time. This article will look at some ideas.
First, some background. The federal governments new LTC insurance plans have several positives. For instance, many of the features are common to all LTC policies. And, the government is not contributing toward the cost of coverage. However, the programs modified underwriting approach, plan benefits, exclusion of independent agents and commissions, and lack of preferred health or couple discounts have generated both positive and negative attention.
Even so, the federal entry into the LTC benefits arena is welcome, albeit late. Aetna, CNA, John Hancock, MetLife, Prudential, TIAA-CREF, UnumProvident and LIMRA indicate there are already hundreds of LTC offerings by other public entities (see chart).
Such programs are welcome because they bring what amounts to “free advertising” for the product class. Furthermore, the media often helps to generate interest in the coverage. Both developments help heighten public awareness of, and interest in, the product.
However, industry response to public sector LTC programs sometimes unwittingly damages these positive effects. Some examples follow.
In the case of the federal program, for example, an Oct. 14, 2002 article in the Federal Times notes that one insurer has since launched a competing program to attract federal workers, a program with several benefits the federal plan does not offer.
Meanwhile, a recent announcement about a LTC insurance plan for county government workers in the Southeast got a surprising response. Three group LTC carriers put in bids. So did a local brokerage, but it offered individual products of one of the bidding group carriers. The individual bid not only ignored the group bid from the same carrier, but also disparaged group products in general.
Over in the Pacific Northwest, sales were disappointing on a group product that was offered to public employees and retirees through individual agents. Some observers have posited that agents ultimately sold individual policies to their group customers.
Finally, in some areas, agents have written op-ed pieces for the local press or spoken publicly about the failings of a publicly-sponsored group product. These efforts imply that public dollars were spent on poorly designed products or that “big brother” was somehow encroaching on free enterprise.
These various developments suggest some changes are in order. Naturally, group and individual offerings, and the specialists supporting them, are inherently competitive. But in pursuing this competition, insurance interests need to take care not to trigger distrust or further avoidance of private LTC insurance on the part of employers and potential participants.
Here are some suggestions to achieve this:
Coordinate bids. When bid opportunities arise which are not specifically focused on group or individual products, carriers might have both their group and individual departments discuss the bid request. They might then agree to offer only one set of products, or they might jointly offer a workable combination (e.g., a group product for the active workforce and their families, and an individual product for retirees).
Use incentives. Carriers might consider offering financial incentives to internal staff and independent agents who use practices that support case-specific sales of the companys LTC insurance products, whether individual or group.
Share group and individual features. Carriers should continue to incorporate some of the features of one type of product into the other. For example, include spousal and preferred health discounts in group plans, and less restrictive underwriting and more level commissions in individual plans. Perhaps also revisit implicit age-based subsidies in group and individual products to balance attractiveness to, and potential risk from, different age groups. This could increase the competitiveness (and even the playing field) between individual and group products.
Give plan sponsors accurate and balanced information. Consultants, brokers and carrier marketing staff should ensure that plan sponsors are fully informed of plan design, underwriting and other salient differences. Although this approach could be specified in formal marketing/sales requirements promulgated by carriers or state regulators, it might also be voluntary (e.g., via informal carrier, regulatory or National Association of Insurance Commissioners guidance).
Dont engage in marketing wars. Just provide balanced information that officials need for effective decision-making.
As LTC public sector marketing continues, those involved might take a lesson from public elections. Negative campaigning can discourage voter turnout. Likewise, negative sales activities may reduce “buyer turnoff.”
Florence G. Katz is senior consultant, Mercer Human Resource Consulting, Seattle, Wash. She may be e-mailed at [email protected]
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 20, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.