Insurance professionals ask how I believe the “new economy” will impact long-term care insurance sales, and I answer them in two words: more focus.
Anyone who believes the present and future for LTCI will be very similar to the past risks joining the ranks of Hummer. Our rude economic awakening was not kind to the car brand. Sales fell from a high of 35,000 units in 2003 to just 1,500 in 2009. The last Hummer rolled off the assembly line in February 2010.
The new economy is already impacting long-term care insurance, and the good news is that many are successfully capitalizing on the current market environment. The secret to their success? More focus.
FOCUS ON: THE PRIME MARKET
For decades, many producers have refused to heed the advice of those who clearly defined the LTCI market as rather limited. While the enthusiasm and passion of those who believe all American adults are in the market for LTCI is well-placed, marketing to such a broad group is a luxury that those who have limited time or resources can no longer afford.
The market for this product is roughly 15 million to 18 million adults. They are men and women (mostly married) who are between the ages of 52 and 67. They can medically qualify. (Note that baby boomers have the highest pro-rata percentage of obese adults.) They possess the following attributes: sufficient income to afford premiums, assets they wish to protect and an affinity to plan for the future.
Finally, they have been touched by a long-term care incident within their own family or circle of personal connections. This last motivation to act is the reason I give a spread in the range of viable prospects.
For those who are already shouting at me about how they successfully sell this product to 40 year olds, I say “Well done.” In 2010, research from the American Association for Long-Term Care Insurance (AALTCI) found that just 3.8% of new individual policy sales were to ages 44 or younger. In the new economy, those who will succeed will focus on opportunities where the most return will come from the least expenditure of time and effort.
FOCUS ON: NEW ECONOMY MESSAGING
To those with income and assets, the best thing about the new economy is lower prices. If you don’t believe Americans have morphed into a nation of coupon-clipping, frugally conscious consumers, think for a moment about how your own money-spending behaviors have changed.
In the new economy, those seeking to save are no longer called cheapskates. They are wise and prudent planners. They comprise a new majority of Groupon groupies. (The Groupon site gets some 8 million to10 million visitors a month.)
Unfortunately, long-term care insurance suffers the malaise of being perceived as an expensive product. That’s the result of years of industry reports — none of which we at AALTCI issue — that declare the average annual premium falls in the $2,100 to $2,200 per year range. Because some 70% of LTCI buyers are couples, from the consumer’s perspective, those numbers translate to a lofty annual cost of more than $4,000. Looking back, we have no one to blame for the “too expensive” perception but ourselves.
Looking ahead, the dilemma we face is how to overcome this perception without creating the impression that we’re offering a product that’s substandard or inferior. The answer lies in utilizing highly effective messaging on a consistent basis to support the real affordability of this product.