“Consumer awareness” joins “the aging population” and “the Federal Program” at the top of the list of reasons for insurance industry optimism regarding the future of long term care insurance. It is also what is keeping LTC insurance executives up at night.
Insurers and producers agree that the industry has made progress over the past several years. Americans are becoming more aware of LTC needs and of LTC insurance.
However, this growing awareness has yet to translate into sales. Only 5% of individuals over age 50 have purchased a policy, according to LIMRA International estimates. This is a far cry from the 35% penetration rate industry executives estimate will be needed to significantly impact LTC financing needs in the United States.
Producers and executives interviewed at various focus groups sponsored by LIMRA expect the desired penetration rate will be achieved sometime in the next 10 to 20 years. Their hope is that, as LTC insurance goes mainstream, more and more people will start talking about it, as happened with 401(k) plans.
The question many LTC insurance marketers are trying to answer is how to accelerate this growth. One answer may be to make the product more attractive to consumers. To date, both insurers and producers agree product enhancements have made the coverage more marketable.
Many intermediaries commend carriers on having done a good job of identifying and delivering product features consumers want, such as spousal discounts, home health care and assisted living benefits. The question is, at what cost? Some industry executives feel, as do many consumers, that the product has become too complicated and should be simplified.
Most producers and insurers believe the product is strong and that the answer lies not in the product but in expanding current marketing strategies and in strengthening the industrys image. In fact, when asked about future prospects, most producers in a recent qualitative research study indicated they expected their LTC insurance business to grow.
As demand for the product rises, these producers also expect more producers will enter the market. Further, they foresee alternative distribution channels challenging the more traditional channels currently being used today.
It is commonly believed that growth will come when the industry does a better job of educating the public about what the product is and what it is designed to do. The more exposure individuals have to this product, the greater the chance the core message will be heard.
However, most producers interviewed by LIMRA are not that concerned with increasing awareness among the public. They believe awareness will naturally grow as a by-product of aging. According to these producers, limited product knowledge among consumers is the greater concern. They worry consumers are being hit with information overload and thus, becoming desensitized to the real needs and features of LTC insurance.
In addition, many producers feel they are currently operating in an environment in which public skepticism about LTC policies and carriers abounds. This, in turn, makes the education process more difficult.
They also worry about the effect that recent negative press is having on potential clients.
Thus, it is not surprising that when asked to identify the most important attributes they look for in a LTC carrier, the carriers reputation within the industry and its financial ratings were first and foremost in their minds. These are extremely important attributes, they say, especially since the agent is the one on the front line, dealing with client questions should things go awry.
When asked the same question, industry executives indicated they believe producers place less emphasis on a carriers reputation and financial integrity. They thought the producers top criteria for choosing carriers were the producers own experience with a company and competitiveness of the commissions.
However, that does not appear to be the case. Of the 14 suggested carrier attributes, producers active in LTC insurance rated commissions as the “least important.” What concerned the producers are essentially the same issues that concern carriers: the effect rate increases will have on future sales; consolidation within the industry; and misunderstandings and negative coverage in the media.
As for the future, most producers believe the industry will eventually go through a period of consolidation. Insurance executives are less circumspect, however. They predict the size of the LTC insurance industry will change in the next five years. Many expect several carriers to exit the market and sell their existing in-force business. One executive predicted, “Only two of the top 10 carriers will be selling LTC insurance in 2007.”
For now, producers believe carriers must strengthen their general advertising and promotion of this product in order for it to become more visible. Meanwhile, since LTC insurance is generally sold not bought, companies will need to find a way to have more producers capitalize on increased consumer interest in order to achieve greater penetration rates.
Jennifer Douglas is an analyst in long term care research for LIMRA International, Windsor, Conn. She can be e-mailed at firstname.lastname@example.org. Anita Potter is a manager in LIMRAs product research center. Her e-mail is email@example.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.