Long Term Care Agent: Are You Changing With The Times?

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Many Long Term Care companies are getting out of the business; many of those that are staying are planning significant premium rate increases. Its not a question of whether these changes are going to upset old clients and make prospects uneasythe answer to that is an unqualified YES. The real question is whether you as an agent are willing to make the necessary changes to stay competitive in this market.

Those agents that continue to address the marketplace in the same old way with the same old presentations will be facing fewer and fewer sales and a corresponding decrease in income. On the other hand, those willing to redefine their prospecting, marketing and sales techniques will hear opportunity knocking at the door.

For years, many agents have assured prospects that they need not worry about future rate increases with this being a particularly strong point in their sales presentations. These claims were based on previous history, but in fact, had no basis in reality. There has never been any sound actuarial or statistical data indicating that long term care insurance policies were in any way immune to rate increases. To the contrary, anyone who cared enough to look into the matter even a little realized that increases had to come sooner or later.

So here we are like over-matched fighters facing a barrage of heavy punches:

BAM!!! 50% rate increases are being filed by companies and approved by state insurance departments.

BAM!!! Companies are getting out of the business altogether.

BAM!!! Those companies staying in the market are increasing renewal rates and new policy premiums.

The key to surviving is to stop getting hit! To do that, you need to change your tactics.

The day of the one-size-fits-all spreadsheet salesperson is over. Way too many presentations have been based on a standard daily benefit approach. The agent goes out and gets a number of quotes and then puts them on a spreadsheet that is subsequently put in front of a prospect. The theory, of course, is after seeing evidence of all the agents efforts, the prospect follows the agents advice and chooses the lowest premium.

Although this approach does eliminate a lot of competition, it tends to be a bit shy on realities. For one thing, it requires the assumption on the agents part that all the different LTCI needs can be met with the same standard benefit package. If we have learned anything about long term care services and patient needs, it is that they differ from place to place and person to person.

In the new long term care marketplace, benefits should be designed based on individual needs rather than a standard dollar amount. Now more than ever, the actual cost of LTC benefits needs to take into consideration the clients available income along with any insurance.

Addressing the new realities of the LTC marketplace will result in a more knowledgeable agent who, in turn, will provide better information to prospects and allow them to make more educated decisions.

Ideas for Change

Let the prospect learn about the cost of long term care by participating in a need-analysis worksheet. The use of standard, across-the-board numbers like $100 per day or $150 per day must be replaced with more realistic numbers that the prospect not only understands but also can actually see how they have been calculated.

One way to do this is to use a long term care calculator that takes into consideration the actual dollars an individual prospect has available for a possible LTC need and subtract that from the actual local cost of LTC. Note we always suggest the use of local cost rather than national or state averages. There are a few variables we need to keep in mind when using the LTC calculator with one being that a couple would use a lower LTC factor than an individual.

The LTC factor is that percentage of income that a person can allocate reasonably to the cost of long term care services. We like to use a 40% LTC factor for couples and 85% for individuals. The reason we suggest a 40% factor for couples is that historical evidence suggests the cost of living for the spouse not using the long term care service doesnt drop significantly, and in many cases, it increases. Although extensive research was used to arrive at these percentages, we dont feel they are set in stone, but they must be based in reality.

The actual percentage you load into your calculator may vary. What is important is to keep in mind that the number you use is rooted in actual experience in your local marketplace. What is vitally important is that you only list those sources of income that are guaranteed for life. Fluctuating income sources from investments that are subject to significant fluctuations in their underlying value shouldnt be used in the LTC calculator. They should only be considered at their true value at the time of the need.

Start by loading the calculator with all guaranteed income sources available to the prospect. Data for joint cases should be listed separately. The reason for this is that in many cases there is a significant difference between the need and cost from one spouse to the other. All entries should be listed on a monthly basis. The total of these income sources is then divided by the LTC Factor. This gives you the out-of-pocket amount available for monthly long term care services. The cost of prescription drugs must be taken out of the equation. After subtracting that, the result is the net available for LTC monthly services. This ends the first section of our work sheet.

Something commonly missed by many long term care insurance salespeople when dealing with retired couples is the “lifetime income component.” All too often, agents assume that the death of one spouse will have little or no effect on the income of the other, and to be fair, this is sometimes the case. However, in many cases particularly when the majority of retirement income is derived from one spouse, drastic changes can occur with that spouses death.

The parents of a friend of mine are a good example of this. His father was a blue-collar worker his entire life, and when it came time to retire, he had accumulated a nice pension from his union. This pension combined with Social Security gave him and his wife a comfortable income without tapping into their meager savings. Everything went along fine until my friends father passed away a few years after retiring. This is when my friend came to me in something of a panic. As it turned out, when his father was filling out the required forms for his pension benefits, he chose to take a 100% payout during his lifetime. As such, upon his death, payments from his retirement plan would cease leaving his widow with nothing but Social Security and whatever she could draw from their savings to live on.

When you are working with a single person it is important to change the percentage use for the LTC factor. Here we use 85% and once again this isnt set in stone, and any money required for expenses that would continue after entering a long term care facility should be taken into consideration. With that exception the calculations are the same.

Now we have a system in place that allows us to come up with a realistic number for LTC costs and that allows the prospect to see how those number are calculated. In addition, and maybe even more important, is that agents will realize an increased awareness of the numerous possibilities available to address the LTC issue.

In addition to the aspect of actual insurance required, we need to address the product availability aspect of the LTC market. Its amazing to me how many LTC salespeople who attend my sales training and continuing education courses are unaware initially there are alternatives to traditional health-based, annual-pay, long term care insurance. Life insurance-based LTC polices, annuity-based LTC polices and single-premium LTC polices with return of premium provisions are available, and yet they go relatively unused and in many cases unnoticed.

It is imperative, now more than ever, for a long term care salesperson to take the time to investigate and learn how companies are using different chassis to support the various LTC products and their applications. Taking the time to investigate and understand all the different product types available is no longer an option for the serious long term care professional.

If you intend to be a player in the new long term care insurance world, you need to be well versed on all the different types of coverage available to meet the ever-changing financial realities being faced by clients and prospects. Otherwise, youre going to be on the wrong side of an uneven playing field.

Jonathan J. Neal is president of the Society of Certified Long-Term Care Advisors. He can be reached via e-mail at jneal@cltca.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, February 20, 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.