Lighting A Fire Under LTC Insurance Sales

By Linda Koco

Long term care insurance professionals who made it through 2004 seem to be a tough bunch.

Despite an environment where, as reported by LIMRA International, annualized new premium declined 28% in the 3rd quarter of 2004 from the same period a year earlier, these professionals still have confidence about the industrys prospects.

It was not a bad year for all, points out Jesse Slome, president of LTC Sales Creators, Westlake Village, Calif. “For instance, 4 carriers saw sales rise by 20% or more and 2 others saw sales rise by 10% to 19.9%. Meanwhile, 3 insurers ceased sales entirely during the year, so of course sales at those carriers are down.”

LTC practitioners should not focus on the negatives, says Slome. In fact, he adds, though there have been market exits and corporate shifts in the past year, “Ive heard that several carriers are planning to enter the market this year.”

Guardian Life Insurance Company probably should be on the new-entry list, since it debuted its first proprietary LTC insurance product very recently (in the fall of 2004), through Berkshire Life Insurance Company, its Pittsfield, Mass., subsidiary.

Guardian is positioning LTC insurance as a core offering alongside life and disability insurance. And, the insurer is requiring agents to pass a 5-hour LTC certification course before they can sell the policy, says Donald Campfield, national sales director for LTC insurance.

Why the push? “Our general agents have been asking for a proprietary LTC policy,” he says.

Many Guardian customers are affluent baby boomers who are looking for planning services and product solutions, explains Kenneth Murrell, second vice president-product marketing and research. The LTC product fits into the needs of this market, he adds.

As for the certification program, it ensures that agents can work with the product knowledgeably. Thats important, says Murrell, because Guardian clients prefer to work with informed agents who are trained in their disciplines and products. “They want to buy from people in whom they have confidence.”

Another reason for the entry is that a proprietary LTC policy is a good recruiting tool, says Campfield. “Our GAs said the producers have been asking, do you have your own LTC policy?” he recalls, adding the requests were coming from agents who are experienced in building client relationships and providing full financial services. Those are the type of agents Guardian wants to recruit. When such advisors join a career agency company, they are making a huge decision to commit to just one company, Murrell notes, so committing to a carrier that has all the core products is therefore very important.

Not incidentally, all 3 of Guardians benchmark competitors already have their own branded LTC products, says Murrell.

From an industry standpoint, the big issue for 2005 is how to build sales momentum. Here are some suggestions.

Do more marketing. “The first and only way for LTC to grow in the United States is for the industry to do more marketing,” contends Mark Allen, a life and LTC broker at A&W Insurance in Lakewood, Colo. This effort should be led by carriers, but it would help to have individual producers do some marketing of their own, too, he says. When Allen broached the subject of LTC insurance with clients a few years ago, many had never heard of it, he recalls, but after there was some radio and TV exposure, people became more interested and receptive.

Tie-in to government programs. “The best year we had occurred 2 years ago, when the federal government started promoting its own LTC program,” recalls Arthur Stein, vice president with First Financial Group in Bethesda, Md. In announcing that program, the government effectively was saying, “you need to think about this,” he recalls. “That stirred up interest, we could compete and sales were tremendous.”

Once the federal government stopped its heavy promotion, “people stopped talking about it and sales have not been as great,” he says. “Its very disappointing.”

Stein, like Allen, believes promotion of the need for LTC and of the fact that solutions are available will do a lot to help sales. Therefore, he was happy to see that the federally funded LTC Awareness Campaign was launched as a pilot in 5 states on Jan. 10, 2005 (see box). He also would like to see carriers start advertising LTC insurance more than they have in the past year.

Sign up qualified agents. Carriers should focus on contracting with qualified advisors and helping these advisors by offering prudent pricing and adequate commissions, says Kathy Halverson, president of Halverson Planning LTC, Green Bay, Wis. She says this because she has noticed that some firms are using solicitors, not advisors, or are relying on generalists for sales. Many of these producers do not have a strong enough LTC background to build sales and do right by the client at the same time, she contends. After reviewing their work, she has concluded that some only “sell out of loyalty to one company, without considering the clients needs,” while others fail to interview the client and follow through. That has resulted in inappropriate or overpriced contracts, or no sale at all, Halverson says. Her recommendation: Sign up producers “who know how to do a good job for the client and close the sale.”

Be careful in selecting carriers to represent. This is the flip side of the previous point. Due to the last years market shifts, agents are doing a lot of searching, says Andy Mako, senior vice president of Prudential Long Term Care Insurance, Newark, N.J. “They are looking to attach themselves to new carriers.” His advice: Look for stability and strength, and for carriers that offer the value-added services such as training and packaging of materials for different customer segments. He stresses that the parties to such contracts do retain their independence, “but they will work together as partners.”

Offer short-term LTC policies. These are lower-price plans that cover for up to 364 days, says Robert Vickery, principal of Diversified Services Group, Wayne, Pa. While not adequate for all clients, he says, the plans will be as attractive to, say, older buyers (age 65-68) who cant afford the high premiums of comprehensive plans running 3+ years. “One problem is that most state regulations currently focus only on traditional comprehensive plans,” Vickery adds. But he says the industry can address that by urging states to “allow less than Cadillac coverage, too.” Carriers should simplify the underwriting for these contracts, he adds. Such products will make older-age sales grow without undue exposure to the insurer, he predicts.

Keep working to clear up confusion about Medicare, Medicaid and LTC insurance. Surveys show many people still believe the myth that Medicare will cover all their LTC expenses, says Prus Mako. “So, the industry needs to continue to improve awareness about this.” Like Stein of Maryland, Mako is glad to see the 5-state pilot of the LTC Awareness Program. The campaign is not tied closely with the insurance industry, but it does mention insurance, he notes. The industry should capitalize on these kinds of initiatives, he says. “It needs to be awareness driven, not sales driven.”

Dont wait for tax breaks. It would be great if there is a new LTC tax incentive, says Mako. But if people are not already aware of their LTC needs, he says, theres no certainty they will gravitate toward LTC insurance just because of the incentive. Rather than pinning hopes for future sales on that, the industry should focus on educating consumers, he says. “We need to make it clear what the cost trade-offs arefor instance, I might not need this insurance but my spouse might.” The industry should also innovate on how policy benefits can be used and provide flexibility, he says.

Use a financial planning model. Producers should move from a transaction model and present LTC as part of the persons overall financial plan, says Mako, echoing Murrell and Halverson.

Slome believes it is time for the industry itself to adopt a new model. Rather than focusing on building consumer awareness, the industry should start urging people not to wait until they need LTC but cant qualify, he says, noting that “nearly 20% of all LTC applications were declined in 2003 and 2004, and in the age 80+ group, the declines were 57.2%.” (The data is from a new study of 100,000 LTC applications performed by Wakely Actuarial Services for Sales Creators.)

“The message we need to tell is, Wait and you may not qualify for discounted preferred rates; wait too long and you may not be able to get LTC care insurance protection at any price.”


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.