Like Willy Wonka’s chocolate factory, we now live in a world of “combo” confections coming in all combinations of flavors, sizes and colors. Confusion, misunderstandings and frankly a potential abundance of experience disappointments, stand before us like a solid and forbidding rock candy mountain. Some light has been recently shed on the mysteries and old wive’s tales frequently attributed to the two birds with one stone, have your cake and eat it too aficionados. LIMRA, with the hard work of an SOA LTC Section Council member, has recently released a new combo life study helping clear the fog. The study is titled “Combination Products: A One-Stop Solution?” (full annotation at the end). I would not want to offend LIMRA by publishing any direct information in this column. Instead I will take my usual liberties to paraphrase, embellish and interpret my own personal observations from this excellent work.
Combo life policies do seem to offer solutions to the most common historical complaints concerning stand-alone LTCI health products. They certainly are simpler to explain with fewer moving parts, fewer consumer buying decisions, and the offer of additional stability providing at least the availability of guaranteed premiums and benefits. But the biggest boogie man put down triumphantly is the demise of the dreaded “Use it or Lose it” monster selling objection. Someone is going to get some money period. The study identified three categories of product offerings: 1) Life with chronic illness—IRC Section 101g; 2) Life with long term care—IRC Section 7702B; and 3) Life with an EOB rider paying both an acceleration of life benefits and an extension of benefits paid beyond the face amount—all as a long term care benefit. Not all companies in this market participated in the study. For the purposes of this article I would guess somewhere around 50 companies or so have some form of rider available.
What we learned:
The study ends with five key issues that stand before us: Consumer perceptions of the new offerings; product visibility; regulatory and compliance concerns; operational friction as dual administration issues require the ability to walk and chew gum; and, finally, risk management strategies in a new line of business without sufficient experience.
However, the most important finding from the majority of surveyed consumers was...they want to buy! There is something very basic, charming and endearing about simplicity—hopefully guaranteed premiums with guaranteed benefits that we should all find extremely attractive.
Other than that I have no opinion on the subject.
“Combination Products: A One-Stop Solution?” LIMRA. Authors: Scott R. Kallenbach, FLMI, Director, Strategic Research, LIMRA, and Linda Chow, FSA, MAAA, Senior Actuarial Consultant, Ernst & Young LLP.
Ronald R. Hagelman Jr., CLTC, CSA, LTCP
CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products. A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing "friend" of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman is president of Broadtower Insurance Solutions, a national IMO helping BGAs enhance LTCI production. Hagelman can be reached at Broadtower Insurance Solutions, Inc., 156 N. Solms Rd., New Braunfels, TX 78132. Telephone: 830-620-4066. Email: [email protected] Website: www.BroadtowerInsurance.com.