LTCI undergoes an evolutionary change

Many advisors assumed that since clients plan for everything else, it makes sense to plan for an event that is so likely to happen and so catastrophic if it does. Consequently, they think they can simply present a brand-name product with solid benefits and the prospect will sign up. The solution, he believes, is a return to the “blocking and tackling” basics of selling LTCI.

“They never realized how strong many people’s aversion is to even discussing the topic of planning for long term care or thinking about getting old and losing their independence,” he says.

Strong multi-life market
Phyllis Shelton, owner of LTC Consultants in Hendersonville, Tenn., points out that in 2008 51 percent of LTCI sales took place at work sites and multi-life sales grew 47 percent between 2007 and 2008. One important reason for that growth: simplified underwriting.

“I did my own survey about a year ago with several carriers and found that at age 65, about 30 percent of the applications are declined; at age 75 it’s more like 50 percent,” she says. “When you move into the work site and there is simplified underwriting, some companies have four, five or six questions, versus full underwriting, and some companies even offer that to working spouses.”

Adaption of hybrids
Another trend Shelton has observed is the development of combination or hybrid products, such as annuities that are coupled with LTCI. She anticipates significant activity in this area (after the key January 1, 2010 date) but notes wide variation among the products. Consequently, she is moderating a conference in late May that will focus on hybrids. “My observations are that there are no two (products) exactly alike” she says. ” As far as the actual cost of the long term care insurance premium piece, it’s lower than a traditional plan, because you have to understand people are really using their own money at first and then they have the potential to buy extra time.”

Improved education for producers
Harley Gordon, president of the Corporation for Long Term Care Certification Inc. in Newton, Mass., believes another important trend is carriers’ investment in education to encourage advisors to sell LTCI. Carriers, he says, particularly career shops that focus on higher-net-worth individuals, have decided that any sustainable production is generated not solely by focusing on product differentiation, but rather on giving agents compelling reasons why the product must be sold. Advisors don’t sell risk to an individual, Gordon believes. Instead, they educate clients about consequences to their family if an unexpected event occurs. They don’t focus on selling a product to protect the client but rather on creating a plan that will protect his family or those he cares about. “That’s the trend I see in education, developing and delivering a message that engages the advisor on a subject that is so important to their clients that they can no longer ignore it,” he says.