“LTCI is dead,” a financial planner told me recently.
“Really?” I asked. “Why would you think that?”
“Well, because no one can get approved, it’s way too expensive, and I don’t want my clients to be faced with rate increases. Now I sell hybrids to all of my clients. That way at least someone is guaranteed a benefit.”
“What do you do about the clients who can’t afford to plunk down $100,000 for a policy? Or clients who can’t qualify? Or clients who want a Partnership policy?”
Long-term care insurance (LTCI) is not dead. What is true is that the industry is down this year. By some accounts as much as 32 percent. I believe there are a few factors responsible for this drop, and we who sell LTCI have all played a part in it. Let’s take a look at what’s happening and see if we can’t collectively reverse the trend by slightly changing our behavior.
First, more applicants are getting declined.
This is due to a combination of two things: Underwriting has tightened up and more applicants are waiting until there is already something wrong before they apply for coverage.
When an agent calls me for a quote on a 74-year-old female who “is in great health except for some blood pressure medication,” I know there is already a problem. No one wakes up at 74 and says, “I think I’ll buy some of that long-term care insurance” unless they are already facing some kind of care event. So, overall, the folks who want to buy the coverage can’t qualify.
Second, the ones who can qualify aren’t buying
We all know the perfect age for buying LTCI is 50s to early 60s. So why aren’t they clamoring to buy?
Here’s a look at three reasons for the slowdown — and five ways to respond.
1. Consumers think the industry is in trouble.
Thanks to all the bad press LTCI has received, consumers have the impression the entire industry is unstable and unreliable. As agents we’re sure not helping when we also lament the latest changes. Also, companies trying to sell alternate products aren’t exactly helping. We’ve all seen advertising that sort of goes like this: “If you think LTCI is too expensive, then you should be looking at this life insurance policy with a long-term care rider!!”
I’ve sat in on countless webinars where the speakers degrade LTCI in order to promote their own products. If an agent with little or no experience with LTCI hears that enough, he begins to think, “Wow. I wonder if LTCI really is in trouble?” and will pass that sentiment along to his clients.
2. Rate increases seem much worse than they really are.
Company X decides the block it sold from 1995 to 2000 needs an increase. The company files, gets it approved in five states, and we see, “Company X has been granted an increase on its LTCI product!!” Then the company gets five more states approved, and guess what we see? Yep, once again it’s “Company X has been granted another increase on its LTCI product!!” Except it’s the same product! When the company does this ten to 15 times, the consumer – who doesn’t know any better – thinks Company X is completely untrustworthy. When you’ve got three or four carriers doing the same thing, you can see how the consumer might think twice about purchasing any coverage. Especially if the consumer is a healthy 55-year-old. Which brings me to the next point.
3. The people who can qualify aren’t buying.
For years agents treated LTCI as a transaction. And that was OK, because the product was cheap enough, and lots of people bought it. (Oh, the good old days!) Today, with bad press, higher premiums, alternate products and gender-based rates, the product has to be SOLD. That’s the key word here: SOLD.