“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.
This is not a transaction-based product. Those trainers who tell you this is a one-sit sale haven’t paid attention to what’s going on in the real world. Gone are the days when you could go into the house blind with three quotes and sell one of them.
The agents who propose the same coverage over and over, to everyone, aren’t really selling, nor will they be successful. They will tell you, “LTCI is dead – no one buys it anymore!”
So, what can you do to overcome these challenges and make sales?
Here are five ways to move forward.
1. Get to know the clients and discover what their concerns are.
What are your clients trying to protect? What is the plan for caregiving? What kind of budget are they thinking? What are the competing priorities? Do they have life insurance? Do they need or want more?
2. Re-think what a long-term care (LTC) plan has to cover.
Gone are the days when everyone bought lifetime coverage with a 5 percent compound cost-of-living adjustment. Also gone are the days when the client could afford to buy a policy designed to cover the entire LTC risk.
Stop worrying about covering the entire cost of the nursing home stay; that’s not where most care takes place. Besides, baby boomers are going to completely change the way care is delivered. Nursing homes will become the realm of the uninsured and others who have no means to pay for their own care. Plan to cover most of the cost – not all of it.
3. Re-think how to design an appropriate, affordable policy to address the client’s LTC needs.
In 2014, the agent has to be a detective. You have to know: What are the average costs in the client’s area? What will the client have for income in retirement? What will the non-LTC-related retirement expenses be? How much could the client afford to chip in for care?
Once you know this information, you can craft a policy that will fill in most of the gaps. A policy that pays benefits of $2,000 a month can cover most home care, the lion’s share of the cost in an assisted living facility, and at least part of the cost of a stay in a nursing home. For those currently receiving care who have no insurance, getting an extra $2,000 a month would be a windfall.
4. Be willing to think outside the dots.
All agents in the LTCI business are experiencing their share of declines. What do you do for those clients? Don’t give up. In fact, if their health is already compromised, those clients need coverage even more than the healthiest clients. Short-term care policies can offer clients at least one year of coverage. Critical illness and home care-only policies can be easier to qualify for and much more affordable than true stand-alone LTCI. There is even a guaranteed issue home care program available.
5. Remember that some coverage is better than no coverage.
For those clients who say, “One year of coverage isn’t enough,” remember: 49 percent of all claims last one year or less. So yes, just one year of coverage can make all the difference to your client and your client’s family.
So, don’t give up on tackling the long-term care planning problem just yet. Rethink the equation.
See also: Short-Term Care Policies: Who’s Got ‘Em?