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Buying And Selling LTC Insurance--Still A Balancing Act

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I am continually surprised not only that consumers still aren’t buying long term care insurance at the rate we expected but also that advisors still aren’t selling it with the gusto they should.

For LTC insurance professionals who have a passion for the business, it would seem that the fiscal conditions of LTC insurance financing and the upcoming demographic crunch of retiring baby boomers should easily result in double-digit sales growth every year. We’ve built the machine with quality carriers and distributors, encouraged and supported pro-LTC insurance legislation, and created awareness through advertising and public relations efforts. One would think that the only thing left is to sit back and wait for sales.

Unfortunately, there are still many reasons consumers are choosing not to buy and advisors to sell LTC insurance. It is important to understand some of the consumer and advisor objections, as well as appropriate tips for handling those objections.

The Consumer’s View

At the Eighth Annual Intercompany LTC insurance conference in March, America’s Health Insurance Plans, Washington, presented some recent consumer research that provided insight into factors influencing LTC insurance purchasing decisions. The research was the result of 4 focus groups and telephone surveys with 2,000 baby boomers. Here are the key concerns taken from the presentation and research:

1. “I don’t need LTC insurance because I already have long term care coverage.” An astonishing 30% of survey participants thought they already had LTC coverage because they believe that health insurance, Medicare, and long-term disability plans cover it. According to the National Association of Insurance Commissioners, Kansas City, Mo., the actual number of Americans with LTC insurance coverage is 5.2 million, and certainly not all of those are boomers. In fact, almost 25% of boomers believe they have coverage, when in fact they do not. These consumers need to work with a professional who explains what is needed to help secure fully their long term care future.

2. “LTC insurance is too expensive.” This objection goes hand in hand with understanding the cost of actual care. In a 15-year AHIP study of buyers and non-buyers entitled “Who Buys Long-Term Care Insurance,” 70% of non-buyers underestimated the cost of care, while only 13% of LTC insurance buyers did the same. From a premium perspective, the percentage of buyers spending 3% or less of their income on policy premiums went from 54% in 2000 to 67% in 2005. Unlike the odds of needing care, where the numbers are open to argument, the actual cost of daily care is not a debatable number, and its impact will be easily understood in the mind of a rational planner.

3.”I won’t need long term care.” With today’s longevity projections, it is extremely hard to find people who actually think they won’t need LTC in their lifetime. The AHIP survey showed that only 4% of respondents believed the chance of needing care is the one persuasive reason to buy LTC insurance, whereas 21% of survey responses cited the need to “not be a burden on my family” as the one reason to buy it. The fact is that long term care is not something people want to think about, and unfortunately much of the earlier LTC insurance sales efforts focused on the odds of needing care.

4.”The carrier won’t be there or won’t pay claims.” For previous generations, trust in name-brand insurance carriers was enough to secure an insurance sale. Boomers, however, will not place trust blindly in the reputation and promises of the carriers. Indeed, companies are delving deeper into the claims process to explain how it works and what the promise of a LTC insurance contract means. One leading carrier has even announced the built-in availability of a third-party organization to review claim disputes, helping to ensure claims are processed efficiently and effectively.

An Advisor’s View

Advisors also struggle with potential issues associated with LTC insurance. They are justifiably concerned there might be pitfalls with introducing a new product to a loyal and valuable client. Also, some perceive the product as having little benefit in advisor compensation and in client appreciation and could in fact pose potential harm to the client-advisor relationship if a poor experience occurs. Here are some concerns advisors expressed:

1.”The product is too complicated.” This objection might be dated, because in recent years carriers have worked to simplify LTC insurance. However, because the average producer may only sell 2 to 3 policies a year, it is still a legitimate concern. To help alleviate this concern, it makes sense to enlist a brokerage general agency to assist in sorting through the products and give timely product comparisons. Another approach is to partner with an LTC insurance specialist, allowing them to do the selling and underwriting and then split the compensation.

2.”The enrollment process is too difficult, from licensing to the application.” Many carriers assume that LTC insurance is an advisor’s primary business and don’t realize this is often only an occasional product sale for them. Again, using a BGA can help provide required producer training, make sure advisors have the correct applications and help to track the application throughout the process up to policy issuance.

3.”My client can self-insure.” There is no doubt that many clients can handle the cost of care, even if the claim is a 10-year-plus-Alzheimer’s incident that will cost hundreds of thousands of dollars. The question then becomes, Does that financial burden make sense? Many clients who can afford to self-insure buy Medicare supplement plans without regard to the premium. The important issue in this case is to look at the options and write down a plan–whether that includes LTC insurance, the use of retirement funds or the use of other plans, including a combination of life and LTC insurance or an annuity-LTC insurance program.

The perceived downside to buying LTC insurance comes down to 3 basic elements: its cost, the uncertainty of the client using the benefit and the application process. All are legitimate concerns. However, when you weigh these elements against the alternative of not insuring, many clients and advisors will quickly come to the conclusion that in spite of the concerns, LTC insurance is ultimately a smart choice to help secure a positive financial future for consumers and their families.

Tom Riekse Jr., is a managing principal at LTC Insurance Partners LLC, Libertyville, Ill., a nationwide LTC brokerage agency. He can be reached at