What sales strategies are working in the LTCI market these days? What’s going to work in the future? We talked to three top long-term care insurance producers about where the LTCI market is headed, whether hybrids live up to the hype and what they’d like LTCI carriers to change. Here’s what they said.
To read part one of this Producer Roundtable, see: Why (and how) to sell long-term care insurance
Q. What age and demographic group represents your biggest LTCI buyer these days, and what strategies do you use to get their attention? Can you share a sales idea that seems to be working well in this market right now?
John H. Groth, CLU, CLTC, CFP, ChFC, wealth management advisor with Northwestern Mutual: I see that my average age for LTC planning has moved down from the mid-60s to the low 50s in the past 10 years. Some 30 year olds have decided to start planning because this is a risk they are concerned about in the future. The most powerful way to encourage clients to start planning is to ask if they know anyone who needed this kind of care or was incapacitated. If they start to tell you about someone they know, then they might want to cover this risk. A presentation at MDRT’s 2012 Annual Meeting emphasized that people will plan for an LTC event to benefit the people they love and care about. So if they are people who have someone they love, help them understand the impact an LTC event will have if they need it.
Thomas F. Levasseur, CLU, CLTC, M.S. Ed., founder, Beacon Retirement Group: I begin to speak to clients and prospects about the risks associated with an LTC event at age 55. I believe the LTC conversation should be part of any retirement planning strategy. So I find the prime market to be those individuals who have educated their children and are within 10 years of retirement. That’s the sweet spot for my retirement planning practice. The strategy that gets their attention is the demonstration of what an LTC event might have on their retirement income cash flow. Most retirement planning software can illustrate this, and it usually shows the surviving spouse running out of money because of the drain of assets. Most people grow retirement savings to allow for a comfortable lifestyle, not to pay for LTC expenses. Of course, if someone has had a friend or family member go through this, they usually don’t need much of a demonstration.
Brett M. Sause, LUTCF, LTCP, CLTC, principal, Atlantic Financial Group LLC: The average age of a client who purchases LTCI in my firm is 48 to 55 years. I help them understand the importance of LTCI by sharing my personal experience and cautionary tales. I find that taking a solution-oriented approach enables my clients to have these tough conversations with me. The value of LTCI becomes obvious.
An effective way to reach this market is by asking the questions that other financial professionals don’t ask. We ask what plan our clients have in place to handle an LTC situation, if anyone has ever discussed this with them, and if they’ve ever had a parent in an LTC facility.
Q. The hybrid products — life insurance/LTCI and annuities/LTCI — continue to get a lot of attention. Are these kinds of products an important part of your own business? If so, why are they doing well? And if not, why not?
Levasseur: Yes, I do use the hybrid products when the circumstances of a case make them appropriate. When the “I’ll never use it… It’s a waste of money…” mental framework is evident, I will offer these products as optional strategies. Sometimes a client or prospect will have a substantial amount of “lazy money” — a certificate of deposit or cash account that is earning little return or not working as hard as the effort used to save it. That is rather common these days. If, upon questioning, I discover that the purpose of the funds is for emergencies, to pass to heirs, or both, the hybrid single-premium life policy with an LTC rider works. It allows for tax-deferred build-up of cash value at competitive rates of return, access to the cash if needed, and a leveraged tax-free and probate-free death benefit. The death benefit serves as a “pool of assets” to cover any LTC needs and protects the balance of the individual’s assets, income, and lifestyle. If the person is uninsurable, annuity Guaranteed Minimum Income Benefit (GMIB) riders are an option. Some of them have LTC triggers that automatically increase the GMIB output.
See also: 2013: The year of the hybrid
Sause: Hybrid products are an important part of my business for some clients, but they are not right for everyone. I would say a life/LTC combo contract is more of a niche market solution. It can be very effective for the right client, but not everyone has the available capital to reposition into these products. When evaluating hybrid products, it is imperative to determine the client’s suitability.
Hirsch: If you could advise the carriers regarding realistic steps that they could take to improve the LTCI market for all concerned — carriers, producers, and consumers — what would you advise them to do, and why?
Levasseur: Underwriting is the biggest issue these days. In the “old” days, companies were not very accurate in calculating the risk and, at the same time, were eager to gather premium. Today, there are much fewer carriers, and those carriers have become very stingy. The biggest problem that I face as an advisor is, after getting someone to buy into the need, I can’t find a company that will take them at an affordable price. Also, the companies need to do a better job of administering their underwriting process. I’ve had applications held up for as much as four to six months trying to get them issued. I think that insurance companies need to beef up the service side of the equation. They spend a lot of money on advertising and product design to capture more business, but then fall short in servicing the business. As advisers, we think of the products we sell as strategies designed to produce benefits to meet contingencies in the future for our clients. When the time comes, we need to be able to be confident that the companies we choose will step up and help us deliver those services in a timely and accurate manner.
Groth: LTC planning is important to our society, especially when you consider the information taught in June at MDRT’s 2013 LTC session. Medicaid is nearly half the budget for several states, and this expense cuts into the money that will be available for education and other state budget items. If more people develop strategies to address the impact of LTC events, it would be better for their families and for our society and economy.
For more on long-term care insurance, see: