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LTCI Watch: Mom and Pop

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Michael Lies, the chief executive officer of Swiss Re — a reinsurer with a big stake in the future of the world’s long-term care (LTC) financing arrangements  — would like to see regulators create a new class of infrastructure investment vehicles aimed at insurers.

His argument is that, given how low interest rates are, insurers with long-term obligations need a new, liquid, regulator-approved, rating analyst-approved class of assets.

Of course, that makes a huge amount of obvious sense.

But I think issuers of insurance products that depend on the future existence of middle-income consumers should also figure out some way to invest in the commercial finance strategy needed to keep mom and pop businesses around on Main Street.

The trust fund babies who keep the world’s socialist websites and protest marches going claim that the wealthy people and big corporations of the world want to steal regular people’s piece of the pie and increase income inequality, not decrease it, but, obviously, that’s absurd, at least in the world of financial services.

Sellers of products such as private disability insurance and long-term care insurance (LTCI) depend on the existence of people who have enough money to pay insurance premiums, and to look like good risks, but not enough to be able to self-insure. 

LTCI specialists, for example, depend much more directly on the financial health of the middle class than rabble-rousers who just call Mom and Dad for more pizza money when they get through with throwing pink paint and confetti on the capitalist 1 percenters in Davos.

When I go home to my parents, I see that they and their Main Street-business owning friends are scraping by because they can live off of financial assets and social connections they accumulated back when small businesses could go to local bankers and get business loans.

I can’t think of any friends my age — members of Generation X — who have started any kind of ordinary, brick-and-mortar small businesses. I’ve heard of GenXers starting restaurants, and dot-coms, but, when I look at actual storefronts, it seems as if most of the owners are simply burning through their retirement account money, living off of a spouse’s money or an inheritance, or scraping by with a business that needs no capital.

Meanwhile, publicly traded companies that don’t appear to get all that much more business and don’t seem to generate that much more revenue per customer visit gobble up the storefronts.

My working hypothesis is that the publicly traded companies are creating huge, unprofitable or marginally profitable empires because they can use accounting gimmicks to pretend to be doing OK long enough to get huge sums of cash from Wall Street. Meanwhile, Main Streeters who have lived and banked in the same community for 100 years can barely get a department store charge card.

If insurers and reinsurers could find a carefully risk-controlled way to invest in Mom and Pop, maybe LTCI specialists would have an easier time reaching the moderately affluent market, because there would once again be a significant number new lives flowing into the moderately affluent market.

See also: LTC Insurance Specialist Looks To Affluent For Sales


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