Middling LTC Insurance Sales? Maybe Its The Presentation
By Jonathan Neal
In my opinion, the single largest hurdle that long term care insurance salespeople must overcome today is in the presentation phase of the sale process.
Having watched more than a hundred different agents make presentations, it is painfully obvious that by and large they are basically the same. They tend to make the same errors over and over. This is primarily due to the generally accepted sales techniques that have been used in the industry for more than 15 years.
It seems strange, at least to me, that long term care salespeople rely so heavily on statistics in their presentation, yet ignore the one statistic that proves they are doing this wrong. More than one survey shows us that over 85% of all seniors say they have concerns about long term care and yet less than 5% have ever purchased LTC insurance.
Think about it for a moment. If youre only successful in making sales to less than 6% of your target market there is something wrong. Either your market demographics are wrong or your presentation isnt being received very well.
As for the demographics, there can be little question as to seniors being the market. It is true that more and more young people are buying LTC insurance, but by and large the senior is the correct prospect. With that in mind, we have to take into consideration that not all seniors are financially equal; therefore, many cant afford LTC insurance. If you use affordability rather than need as the foundation for prospecting, you will find your success ratio increases dramatically.
As for the presentation, there appear to be three fundamental sections that, rather than enhance the presentation, encourage the prospect not to buy LTC insurance: need, negative statistics and funding. Lets take a look at each of these.
For some unknown and surely unproven reason, many insurance salespeople are under the impression that seniors are in denial when it comes to long term care. The truth is that as salespeople we dont show prospects how LTC can make sense financially and why it makes sense for them to look at LTC insurance. In so doing, rather than address the problem with our own thinking, we tend to attribute our failure to their lack of understanding.
In order to address what we, as salespeople, perceive to be the problem (denial), we use statistics to try to prove our (need theory). In reality this is incorrect, and when it fails to produce the desired results, we revert to labeling seniors in general with denial rather than address our faulty theory.
Lets take a close look at the “need assumption.” Most sales presentations use statistics intended to prove to the prospect that the risk of needing LTC is too great to ignore.
There are a few problems here. First, seniors do understand the risk of LTC, in many cases much better than the person making the presentation. In addition, many seniors seem to see through the same statistics so many LTC salespeople hold so dear–for example, the statistic that shows how many 65-year-olds will use some type of LTC in their lives. For starters it shows them that there is less than a 50-50 chance they will need LTC, which in most cases is seen as a positive sign supporting their hope and belief that they will not be one of those that fall into the need category.
Another more interesting question pertaining to this 65-year-old statistic is that we use age 65. But, if the average person using LTC services is 77, and less than 50% of all 65 year-olds actually reach 75, then why dont we use the 75-year-old number? After all, there is a much greater percentage of 75-year-olds using some type of LTC service than there is 65-year-olds.
In addition, the vast majority of 65-year-olds are planning to reach 75, and if they dont, they most likely arent in good enough heath to qualify for coverage anyway. One other quick note on statistics here, why would a 65-year-old care how many 100-year-olds there are going to be in the United States in 2050?
On the use of negative material, so many times I have seen presentations go to great lengths to show the prospect how long certain types of illness require LTC services. I have seen the average length of stay for a stroke victim and the average life expectancy for an adult onset diabetes amputee and, of course, the favorite being the length of care needed by the Alzheimers patient.
True or not, these types of statistics are purely designed to generate fear and in doing so result in negative thought generation. I once read that a single negative thought planted in the brain can affect a person for up to 24 hours. Now, I have no idea as to whether that is true or not, but its more than enough to make me want to avoid negativity whenever possible–let alone make negativity a main feature in my sales presentation.
The third error salespeople tend to make is failure to address the funding of the insurance. Sure, we bring up how much it might cost a person to pay out of their own pocket if they dont have insurance (which, by the way, is almost always understated). What we need to make sure the prospects understand is how they will pay for the long-term care insurance. In other words, the prospects need to identify the source of funding. If youre selling a long term care policy that carries a premium of $2,000 per year, you need to be aware of just how that prospect is going to come up with the $2,000.
The concern here is that many prospects and way too many salespeople dont make the ever-so-important connection between premium and cost when it comes to long term care. The premium is the amount of money required to keep the policy in force. The cost on the other hand is the amount of money it takes to generate that premium.
Understanding the source of funding is one thing, if not the most important thing, salespeople must know in order to ensure they are offering the right coverage. For example, if a prospect is going to pay that premium from the interest he makes off a certificate of deposit, he needs to understand the following formula:
In order to find out how much money is required to fund a premium you must understand this formula. For example, if a prospect needs $2,000 per year and he is presently earning 3% on his CDs and is in the 28% tax bracket, he needs at least $92,592 in those CDs in order to assure he can fund the LTC premium.
It is important to remember that to use the after-tax rate of return, in this case 2.16%. We get that number as follows: (3% / 28% = .84%), (3%-.84%=2.16%). Now lets look at our formula: premium of $2,000 divided by after-tax rate of return, 2.16% gives us the cost, $92,592.
Even if the prospect has $500,000 in CDs he needs to understand that at this time $92,592 has to be frozen to pay that LTC premium.
It is my firm belief that establishing the funding concept is paramount and should be the first part of any LTC insurance presentation. After all, if we start by having the prospect identify the money he has available for LTC premiums or the amount he is willing to risk for LTC should he pay for it out of pocket, then we can build our presentation around a logical assumption–that insuring the LTC risk makes sense financially.
When we do this, we can use logic, basic math and common sense rather than fear, negativity and emotion. Which would you rather use to help clients make a buying decision?
Jonathan J. Neal is president of the Society of Certified Long-Term Care Advisors. He can be reached via e-mail at firstname.lastname@example.org.
Reproduced from National Underwriter Edition, April 28, 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.