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.
Let me share an example. Clearly, one way to make coverage more affordable is to shorten the benefit period, say from lifetime coverage to a defined benefit period. The problem is that three years will never sound as good as unlimited. But, new economy product features — especially the shared care option — make two 3-year policies equal a 6-year plan, which is still more affordable than lifetime. A new approach coupled with affordability will resonate and overcome.
FOCUS ON: MULTIPLE WAYS TO SOLVE THE PROBLEM
In the new economy, the past does not equal the present or the future. Several leading insurance companies recognize this, and a number have already introduced important innovations based on what they believe will successfully capture sales. More will be coming.
Three newer innovations addressing the new economy marketplace include built-in coinsurance, an inflation growth option that tracks the Consumer Price Index, and a shorter-term (just under a year) policy for those who seek even greater affordability or have perhaps waited too long to apply for traditional LTCI.
In the new economy, letting people know that you have a wide range of options to meet their future needs and their current situation will open more doors for you. Those who are open to change will profit.
FOCUS ON: WHAT YOU DO BEST
Google is rapidly killing the world’s generalists (and I’m not referencing dictators). Don’t believe me? In the past year, how often have you shopped for a product or service either solely online or used Google to check prices, ratings or some other feature that influenced your ultimate decision? How often did you buy from someone or a company you found online?
It’s happening with LTCI. Consumer traffic to the AALTCI’s website is up 26% this year; that’s a 42% increase over the prior year. More than three-quarters of the more than 325,000 yearly visitors are consumers. They are looking for insurer ratings (our No. 1 search), comparative pricing information (No. 2) and local insurance professionals (No. 3).
Thanks to Google, Bing and Yahoo, the age of the generalist LTC insurance broker is quickly coming to an end. So, you have two options: increase your knowledge and ability to compete, or partner with an area specialist under the premise that a piece of the income is better than none at all.
If you choose the first path, you’ll need to focus on how “Googlelicious” you are to prospective customers. And by that, I mean the results the consumer sees when they search for your name online after you leave their home or they leave your office. Your online presence is your new economy business card, and the best news is that it can be done quite effectively, without spending any money. In the new economy, free isn’t just good — it’s great!
Jesse Slome is executive director of the American Association for Long-Term Care Insurance (www.aaltci.org), Westlake Village, Calif., an industry organization. The association maintains the nation’s largest online LTCI sales and marketing center. Slome created Long-Term Care Awareness Month in 2001.