Can Group And Blended Contracts Help Spark More LTC Sales?

Idea: The open enrollment period for health insurance is a perfect place to discuss LTC needs. Too many times, these sessions describe how great a particular health plan is for an employee, without touching on the negatives (which are a sensitive subject, especially since group health rates keep increasing). But a group LTC sale probably would be a natural outcome of such sessions, if the presentation were modified slightly to describe what a group plan really covers, and more importantly, doesnt cover, as well as what Medicaid and Medicare cover and dont cover.

For the insurers, it would seem that the morbidity experience, which has been less than stellar on individual LTC plans, naturally would be better on larger group plans.

Of course, the icing on the cake would be the proposed above-the-line tax deduction that would allow people to get a tax break for buying LTC insurance. Or the proposal from Rep. Lee Terry, a Nebraska Republican, would also help; he has introduced legislation that would allow people to pay their LTC premiums with IRA or 401(k) accounts. If either proposal gets enacted, the public would win.

Blended individual policies. The "blended" insurance products combine life insurance with a tax-advantaged early acceleration of death benefit for those able to satisfy the usual LTC triggers (2 out of 6 activities of daily living or severe cognitive impairment).

These contracts are certainly a needs-satisfier from a customer perspective, because they enable the policyholder to become the beneficiary of his or her own life insurance policy. However, these contracts have proven to be a sales challenge. It has been very difficult to train a successful LTC producer to learn enough about life insurance to make an effective blended policy sale. At the same time, the successful life producers many times dont want to learn the nuances of the health/LTC field.

Idea: As more and more companies develop blended policies and as sales of individual LTC policies continue to decline, this problem may be rectified. But speaking as a representative of an insurer that offers blended policies on all 3 life product chassis (whole life, universal life and variable universal life), its been an uphill battle. The successful companies will be the ones that overcome this hurdle. If individual LTC sales continue to be slow, its likely that more and more LTC agents will be forced to learn about and sell these blended contractsbecause they are an alternative market.

In conclusion, the LTC marketplace continues to show tremendous promise, but the product and distribution method will need to continue to evolve to take full advantage of the opportunity.

Michael S. Pinkans, CFA, CFP, CLU, ChFC, is a registered representative and investment advisor with Equity Services Inc. and vice president of sales and promotion at National Life Insurance Company, Montpelier, Vt. His e-mail address is [email protected].

Reproduced from National Underwriter Edition, January 20, 2005. Copyright 2005 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.