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Evolving Consumers: The Rx For Healthier LTC Insurance Sales

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Depending on whom you talk to, long term care insurance industry sales either are better than ever, or they have clearly seen better days. What’s causing the disconnect?

After 20-plus years of involvement in marketing insurance and financial products, I can tell you the answer is quite simple. Those who recognize the evolution of consumers are seeing growth. Those who operate under yesterday’s premises aren’t.

When it comes to long term care issues, what is causing consumers to evolve, and how are these changes affecting attitudes? And what marketing messages will propel sales to higher levels?

For the past five years, consumers have been inundated with messages about the need for LTC planning. By one estimate, the average adult over the age of 50 has received more than 250 messages during that time. In many cases, he or she has responded. The federally funded LTC planning awareness campaign conducted last year in eight states drew an 8% response rate. That level is the envy of any direct marketer.

Moreover, our association’s 2005 monitoring of the all-important consumer print media witnessed a virtual doubling (up an estimated 85%) of articles extolling the importance of long term care planning. On the positive side, virtually all the articles encouraged readers to investigate long term care insurance as a viable solution.

Regrettably, many of these same articles associated LTC insurance with the one harmful term expensive that has limited the growth of market penetration. Perhaps more importantly, the vast majority incorrectly portrayed what protection would cost. In the era of 10-second sound bites, this one spells bad news for increased sales.

For many insurance and financial products, consumer acceptance is closely correlated with constructive media attitudes and corresponding exposure. Both come in phases that evolve over time. Prime examples are 401(k) products, which underwent a similar evolution in both message and acceptance. The first generation of media coverage explained the virtues of saving for one’s own retirement. Over time, media coverage and consumer understanding evolved into in-depth assessments of investment options and, of late, administrative cost-saving measures.

The first phase of creating awareness for LTC insurance has ended, though the results will carry on for some time. The future growth of sales will correlate directly to how effectively one delivers second-generation messaging–in particular, ways that LTC insurance can be made highly affordable. If the media’s and consumers’ perceptions are that LTC protection is expensive, overcoming this will not be simple. However, it can be accomplished.

A recent report by the American Association for Long-Term Care Insurance examined the age at which individuals qualify for good health (or preferred health) discounts, which can enable individuals to reduce the yearly cost of LTC insurance protection by 10% to 20% a year. The information transforms the prior first-generation marketing message that “insurance is cheaper at younger ages” to a far more effective “you’re more likely to qualify for significant discounts in your 50s.”

The availability of discounts already is gaining the attention of financial reporters, who need evolving messages to keep their reporting fresh.

Marketing available discounts will be a highly effective way to overcome the perception that LTC insurance protection is expensive. However, it will prove to be only part of the solution. The second part that’s needed is to emphasize how shorter-term protection can be a suitable option for many consumers and to transform how LTC insurance is marketed and sold.

Consider Mercedes-Benz, which can boast that it has achieved 12 consecutive years of volume growth. The manufacturer’s suggested retail price for the top-of-the-line Mercedes goes as high as $179,600. The MSRP for the least expensive model is $29,700. Both offer the same high-quality image, the same luxury. Which do you think gets more people into the showrooms?

With LTC insurance, marketing needs to evolve from the current approach whereby costs are reduced by withdrawing benefits and features from a policy. The federal LTC plan that successfully marketed four options to government employees–and rapidly became the largest single LTC insurance program in the nation–had the right idea. It offered four packaged plan designs (package one offered a $100 daily benefit for three years) and several options for customizing benefits. Most enrollees chose a reimbursement rate in the range of $100 to $199 per day and a benefit period of three to five years.

The most recent research shows the 218,000 purchasers of the federal plan made prudent decisions both in what they were willing to spend for protection and the level of claims they might actually incur. A study of LTC insurance claims published by our association revealed that “for the three-year benefit period, only eight in 100 claimants exhausted their policy.” Shorter-term protection is clearly more affordable, and affordability will become the driving force in expanding market coverage.

In the end, as Mercedes has discovered, one has to get folks into the showroom before up-selling benefits. Second-generation marketing messages that focus on affordability and repackaging the approach to consumers as well as media are a prescription the industry needs to fill to achieve desired sales growth.