The long term care insurance marketplace is a work in progress–and so is the product.
The changes can make an advisor wonder, who is the ideal prospect in this environment? Well look at that here, but first lets review the climate in which this decision is being made.
Some major carrier re-alignments have been occurring. For example:
A market leader has acquired another leading carrier.
A corporation has renamed its insurance subsidiary and now plans to do an initial public offering on it.
A leading LTC carrier is under pressure from state regulators to increase its statutory reserves.
A leading carrier has ceased selling new policies but continues servicing in-force business.
A foreign insurer has acquired an American carrier active in the LTC market, and a foreign conglomerate has acquired another LTC carrier.
Meanwhile, consumers are trying to sort out the mixed messages they have been receiving about LTC insurancethat is, “you need this insurance but it is very expensive, so Buyer Beware.” Some buyers get the message that the LTC story is a double-edged sword. On the one side is need and hope for a solution. On the other, confusion and misinformation.
What is an LTC insurance agent to do? My view is the LTC glass is half full. That is, the industry does have its challenges, but its future appears bright. Here is why:
For one thing, there is no viable LTC funding alternative in sight for the 76 million baby boomers who are approaching their retirement years. Budget deficits make new social insurance financially impossible. Medicaid is in deep financial trouble.
This suggests that consumer awareness has no place to go but up. Eventually, I believe the federal legislation, now pending in Congress, will provide favorable tax treatment for the LTC premiums paid by individuals. Perhaps it will even provide an above-the-line credit.
In the meantime, the LTC insurance specialist must address the marketand issues–at hand. Namely, who is the LTC insurance prospect in this market of mixed messages and future clarity? Who buys? Who should buy? Who should not buy? Who should self-insure? And, should all buyers buy the same level of benefits in a one-size-fits-all approach?
Getting to particulars, one may wonder how to respond to a 62-year-old recently retired married executive who has a net worth of $800,000. Should this new retiree buy the same LTC plan as a 78-year-old widow worth $450,000? Or, does the retired couple with a net worth of $4 million need to buy LTC insurance and, if so, what type?
What about the couple moving from the cold Northeast to the sunny Southeast? The husband says he will die there, and the wife wants to return to the Northeast if her spouse predeceases her or if she needs care before he does. Should they buy the same level of benefits? Do they need the same level of benefits?
My preference is to employ a needs-based sales approach, not benefits-based. Therefore, my suggestion is to spend a little more time on the front end of client interactions than might otherwise be the case.
Use this time to prepare a complete fact-finding review and to ensure that the buyer is as informed as he/she can be. Also, inquire into the clients needs, motivations and goals.
Next, start assessing benefits. Personally, I think the level of benefits bought by someone in the mid- to late 70s should be different than the level for buyers who are age 55 to 65.
The 10-year age bracket, from 55 to 65, is what I call the “sweet spot” or the best time to buy.
Naturally, personal circumstances will affect this generalization. There may be a daughters wedding to consider, completion of medical school, divorce, death, disability and uninsurability.
Or, your client may be a self-made guy who doesnt care if he leaves any of his money or assets to his children or grandchildren. (Note: If this person does not care to protect some or all of the nest egg, dont waste your time. If this is a real objection and not just an obstacle, move on to better qualified prospects.)
I believe that the truly qualified prospect–by age, income, assets and motivation–is better off with LTC insurance than without it. There are exceptions, of course, as when the prospect is age 75 to 80 and the asset base may be decent, but the retirement income may be modest.
Generally, I avoid using 1- and 2-year benefit plans, because such coverage usually is inadequate for an average nursing home stay.
What does the ideal prospect look like? To me, the ideal prospect is someone who is younger rather than older (my target individual buyer is age 50 to 75). In addition, this person should: be reasonably healthy; have a desire to protect some/all of his or her assets; wish to preserve personal independence and self-dignity; have a minimum income of $60,000 per year; have a nest egg of at least $500,000, excluding the primary residence; and not want to rely on Medicaid or public assistance.
You would be surprised how many baby boomers fit this individual profile.
Walter J. Robinson, RHU, CLU, ChFC, LUTC, CSA, is director-LTC sales at Booth Financial Associates, Norwalk, Conn. His e-mail address is firstname.lastname@example.org.
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 30, 2004. Copyright 2004 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.