The economic downturn is causing a crisis for seniors.
There are several crisis points, including absence of defined benefit income, sharp decline in retirement funds, curtailment or loss of retiree health insurance, what to do about old insurance plans with costs now unsustainable, lack of trusted advisors, and staying healthy and active, despite everything.
Those all present challenges, but they all create opportunities for insurance professionals too. This includes advisors of all kinds who are working with seniors to solve these crises.
Many times, I am called upon to help seniors, but far more frequently, I’m asked to help the professional advisors who are working with the seniors and looking for “personal actuarial services.”
Anyone working in this field learns two things right away:
1) The complete confidence and trust of the senior must be gained.
2) All services must be strictly on the side of the senior.
Professionals often find that a life and health expectancy evaluation (a part of the personal actuarial service) is an excellent way to gain the senior’s complete confidence. It provides a reliable profile of the future healthy and unhealthy periods a person is likely to have in life. Usually, the projected healthy periods are longer than the client expects.
The chart gives some recent examples of health expectancy for people who have cancer. Even when cancer is present, the future healthy periods are usually far longer than the senior client expects. The chart also shows that people with melanoma or prostate cancer have little variance in their health expectancy compared to people who are cancer-free.
However, many seniors who are experiencing crises such as those above are in a state of confusion, bad advice, and indecision. They are facing deadlines without knowing what to do.
The professional insurance advisor doesn’t really give advice. He or she merely lists the alternatives, one of which becomes the obvious solution that fits with what the senior really wants. This changes the situation from a blizzard of confusion to an action point. The senior’s nightmare is over.
The buzz among advisors today is that the seniors gladly pay the fees for service. They often send thank you notes too. The fees are good for the advisor but even better for the client–becausee they dispel any sense of obligation to the advisor and the client feels good about getting his or her money’s worth.
But maybe it isn’t just that easy. The advisor really has to be an expert on all those crisis subjects mentioned above. If that’s not the case, then he or she should not hesitate to call in, or be a channel for, another professional advisor who is an expert on the particular subject in question.
Take life settlements as an example. If the senior says an older life policy has become unaffordable, the advisor may need to explore the settlement option. If the advisor is unfamiliar with this field, the advisor can contact an insurance consultant who knows all the ins and outs. The consultant will charge a fee–rather than a significant commission–to validate and pursue a settlement. The professional advisor should be willing to obtain this type of assistance to maximize the seller’s proceeds.
I will comment further only about two aspects of the crisis facing today’s seniors.
Curtailment or loss of retiree health insurance is certainly a major current crisis. The professional advisor needs to be able to analyze any new plan produced by a retiree health plan carrier, in the light of the senior’s health situation.
What to do about old life insurance plans, when the costs have become unsustainable, is another problem at present. Examples are universal life policies reaching high cost of insurance durations, and vanishing premium products where the illustrated vanish did not occur.
Here, the insurance professional needs to be intimately familiar with all the policy’s features, including paid-up and settlement option features. The advisor also needs knowledge of the life settlement market and the charitable-donation field.
The advisor must also realize that old policies can be appraised. They are valuable!
All of the crisis points for seniors can be calmly addressed. When this is done, the no-brainer answers will easily appear, and the professional will be the hero.
John M. Bragg, FSA, ACAS, MAAA, is actuarial consultant at Bragg Associates, Atlanta; past president of Society of Actuaries; and past CEO of Life Insurance Company of Georgia. His e-mail is [email protected]