Asset-Based LTC Policies: A Great Fit For Banks

By Trevor Thomas

Banks are inherently rich in potential clients for asset-based long term care insurance, experts agree.

For an LTCI producer, whether working directly for a bank or partnering with one, a referral from a banker is a strong selling point, they note. Thats because customers have a great deal of confidence in their bankers advice.

And bank-based reps, with their focus on investments, resource allocation and asset protection, are well suited to sell asset-based LTCI, says Greg Vacca, an insurance consultant to banks.

“Its a nice product for banks that want to provide long term care insurance,” says Vacca, who is based near Irvine, Calif. “It fits their sales force, and if the sales force can do a good job of explaining it, the customer can see its value.”

Now is a good time for banks to seek better customer penetration of asset-based LTCI, observes Ron Wolf, a principal of the Tillinghast unit of the consulting firm, Towers Perrin, Stamford, Conn. Thats because the large baby boomer cohort is approaching retirement and is increasingly aware of the need for estate planning.

“What is driving peoples decision now is first, price and second, qualitythe financial strength of the underlying insurance company,” Wolf says.

Unlike traditional LTCI, the asset-based version accumulates a cash value. It can be either a whole life insurance policy with an LTC rider, or an LTC policy that provides a tax-free death benefit if the covered individual never needs long term care.

The product can be paid for with annual premiums, but banks are most attracted to single-premium versions, says Vacca.

Single-premium policies are a lot like selling annuities, so bank reps are familiar with how to sell them, he points out. In fact, many banks sell the product to customers whose annuity is about to mature, because the proceeds then can be used to fund the premium, Vacca notes.

“A lot of clients have seen annual pay product, and for whatever reason dismissed that, because they dont want to pay insurance premiums the rest of their lives,” adds Bruce Moon, director of financial service products for Golden Rule Insurance Company, Minnetonka, Minn. “Theyve heard rates can go up, and that doesnt thrill them.”

Troy W. Bender, president of UMB Scout Insurance Services, says asset-based LTCI is good for clients who have large pools of money they want to pass along.

“The caveat with [conventional] long term care insurance is, the clients may need the cash they put into the insurance,” says Bender, whose agency is a division of UMB Bank, Kansas City, Mo. “Asset-based products let us take care of that concern as well as the wealth transfer issue.”

Some customers who have a life insurance policy they no longer need are willing to exchange that policy for one that provides a long term care component, Bender says.

Not all experts agree that asset-based LTCI sales are growing steadily, but anecdotal evidence suggests some success for the product.

Moon of Golden Rule, in Lawrenceville, Ill., says his companys Asset-Care LTC product, largely sold through banks, has grown from zero only 7 years ago to a quarter of the companys total premium income last year.

Being a whole life policy, Asset-Care suits the conservative side of an investment portfolio and as such is attractive to many bank customers, Moon says. Golden Rule, which was purchased by UnitedHealth Group, Minnetonka, Minn., last year, sells the product in more than a dozen banks covering 28 states.

Bank producers can build sales by being aware of which customers are prime candidates for this type of insurance, professionals agree.

“The rep needs to talk about the options available, from self-funding all the way to doing a single-premium product,” says Moon.

Another fruitful sales tactic is to get the bank client to talk about the long term care experiences of family members or friends, Moon advises.

Grant Skalski, a consultant to banks selling LTCI, says the product is a good option for customers who feel they can partly self-insure the risk through a high deductible.

Skalski sells policies built on whole life with guaranteed contract rates and guaranteed benefits.

“Guaranteed makes it an easy sell to the bank customer,” Skalski says. “They are guaranteed 4% return, which they couldnt get from a CD. Why wouldnt they do this?”

In his mailings to bank customers, Skalski advertises asset-based coverage with the slogan, “Use it or lose it? Not anymore!”

“That got people to call and come to our seminars,” says Skalski. “It took those fears away from long term care.”

“They have an opportunity to recover their outlay in event of death or if they surrender the policy,” adds John Grande, vice president of U.S. Bancorp Insurance Services, Minneapolis. “It satisfies the individual who is reluctant to buy a traditional long term care policy, because they are concerned about paying for something they may never have a return on.”

Grande says it was a customer who first got his bank interested in LTC back in 1994. “He asked us to look at it and provide an opinion, and as we looked at it, we became more intrigued.”

Most LTCI policies USB sells are single-premium life policies with riders that allow policyholders to take an advance for LTC.

“This is especially interesting to our trust customers, our private client group,” Grande says. “They come to us because our role is to preserve wealth.”

The banks retail financial advisors also have been trained to know when such products are appropriate for their customers.

“Asset-based long term care insurance is definitely growing in banks,” says Vacca. “Traditional long term care is changing. You have big companies dropping out and more opportunities for remaining carriers offering these products.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 5, 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.