Jump-Start 2003 LTC Business With These Questions

Long term care insurance carriers, distributors and producers all seem to be facing the same challenge at the same time. Do we grow or shrink? Do we specialize or broaden our base? Do we invest or cut back?

With the uncertain economy, a rising and falling stock market, and past mistakes now coming back to bite the industry, these are very important questions to ask. Their answers may help jumpstart LTC business for the entire year and beyond.

Lets take a look at why, starting with the issues for carriers. I believe the days of the highly specialized “boutique” LTC insurance carrier are coming to a close. The eventual consolidation of this industry has begun, making it very hard for boutique players to compete against the Wal-Marts and Coca Colas of LTC.

For smaller carriers to exist, grow and prosper at all, they must develop niche products for sale by specialty agents. These products must be built on very strong actuarial assumptions, and outsource much, if not all, of the “back room” services to efficient experts in those areas.

Even the biggest carriers are going to have to become a lot faster, smarter and more “modernized.” This will be necessary not only for them to continue to compete for market share but also for them to be profitable.

At the same time, the Wall Street analysts will continue challenging the carriers on results for what the analysts believe is a highly volatile product line. Carrier leadership will need to convince those analysts that management knows what it is doing, that the company is not taking extreme risks, and that profits can and will be generated long range.

In short, there will be no room for flying by the seat of the pants. To ensure that doesnt happen, LTC insurance carriers must be big enough to invest in the three Ts–talent, technology and tenacity–to aid sound decision-making. An occasional visionary on this side of the equation wouldnt hurt either.

Finally, carriers in this market need to continue to share data and experience, but on an industrywide basis. The way many are doing this now is by letting their best talent become the “temporary help” of the industry. This must stop. Talented leaders need some breathing room to build. If carriers dont allow this, they might as well fold up their tents and go sell final expense policies and stop muddying the industry waters.

On to the distributors. They face many questions in todays market. Here are some of the common ones I hear:

Should we represent many carriers, a few or just one? Roll up other small agencies or go it alone? Stay with one product line or add on complementary lines? Go national, regional or stay local? Look for a buyer or continue to grow solo? Create an exit plan for current leadership or bring in new folks to take over?

Watching the “bottom line” has never been more important for LTC insurance distributors than in todays tough economy. That is no reason to avoid conscious risk taking, however. In fact, now may be the very best time for distributors to take on some new risks, especially if existing approaches are not working very well.

Distributors need to decide “who they want to be when they grow up” and then start acting like that now. Build a quality team a service-oriented team. Pick (new) priorities. Watch time commitments. Become affiliated with advisors who understand the business model (once it is decided). Pay more attention to areas of excellence. Get and stay focused on those areas.

Remember, “distribution is king” in LTC insurance. But without proper planning, a distributor can be “dethroned” pretty easily.

Finally, what about the producers? This group has just as many (if not more) decisions to make as carriers and distributors. The good news is that it can take them much less time to implement a new action plan.

Right now, the key questions before producers are: Go or stay independent or career? Specialize in LTC insurance or generalize? Represent one, a few or many carriers? Work through a wholesaler or direct? Go individual or worksite?

In my view, it will be increasingly hard for career agents to stay on their one-company representation track unless their companies redefine the career agent category. It may be that todays career agents will need to become independent producers in order to meet the varying needs of all of their customers.

Should agents specialize? Definitely do this, but be sure to partner up so your “team” can handle it all.

Going direct to the carrier is not going to be a viable choice. Most carriers cannot and will not support that model. So, find a wholesaler with whom to work. This will provide a lot more assistance and, if the arrangement is done right, it shouldnt cost anything either.

Forget the “one carrier or many” question. Settle on choosing at least two, but no more than four. In my estimate, three would be ideal, equally spread if possible.

Individual or worksite are two different worlds and trying to do both will probably not work. Do the homework and sell where your fit is. Both can be very lucrative but require different mindsets and working models.

As 2003 opens up, carriers, distributors and producers all have a window of opportunity to grow in new ways. This window will not be around forever–December 2003 is only 11+ months away–so now is the time to take stock. Ask and answer the questions of the day and then move forward with your new plan.

Peter S. Gelbwaks, CLTC, is president of Gelbwaks Insurance Services Inc., Plantation, Fla., and past president of the National Long Term Care Network, an organization of LTC brokerage agencies. His e-mail is Peter@gelbwaks.com.


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.