Traditional stand-alone LTCI sales are down although, interestingly, average premiums have remained level for several years. I suspect we have stumbled onto another LTCI “truth.” Perhaps it’s average consumer tolerance of expense that has leveled out at $2,300 annually. Every new survey confirms the obvious—the greatest obstacle to sales is cost. However, in today’s world of proliferating chronic illness riders, it’s not just a matter of cost but perhaps more importantly, “relative cost.”
Frankly, I have mixed emotions about the industry’s current rush to complete their rider portfolios. As was predicted many years ago in this column, ultimately all life companies have to include some form of accelerated death benefit rider/LTCI rider. It is just too easy to sell against a company without one. America’s actuarial firms are currently very busy completing riders for the carrier stragglers that have not yet put their risk abatement houses in order. The cry for “living benefits” is heard throughout the land. Everyone who is anyone will be able to proudly proclaim: “I’ve got one too!” In my mind there is really only one clear positive from the current furor. The recently aroused fiduciary dragon rising like “Smaug” from its slumber beneath a mountain of hoarded gold does now guarantee that ignoring the dragon will only take place at your own personal professional peril. The proverbial sleeping dragon has been permanently and irrevocably awakened and can never again be ignored or denigrated.
Now that we have disturbed and exposed the dragon to the light of day, the problem becomes how and by whom can the dragon be slain without breathing fire on an unsuspecting and unaware consumer. If insurance professionals are going to eliminate an ancient and potentially very dangerous foe, are they in any way prepared for combat? Frankly, I have never seen a more confused and woefully unprepared collection of dragon slayers. Most remain confused as to what weapons would be most effective to the task at hand. There is amazing disarray and inappropriate response to the concept of vanquishing dragons.
The ability to correctly identify your weapon of choice might be a good place to start. A “combo” product is any product that desires to vanquish two risks at the same time. Any two risks combining any stand-alone product attached to any additional risk rider would qualify. “Linked” products are those that specifically link life insurance to long term care insurance in the form of an IRC Section 7702(b) extension of benefits rider. “Hybrid” products refers to life or annuity products with a long term care benefit feature, either present valuing the death benefit or enhancing the annuity payments. When you cannot even properly identify your weapons it may be somewhat difficult to be successful in combat.
Let’s now assume you understand which sword to take to the engagement. What is it that most defines the purpose of the quest in the first place? If the dragon has two heads, life/annuity and long term care, which head should be vanquished first? If you do not even understand why you have polished your armor and sharpened your sword in the first place, failure is a distinct possibility. What has brought you to the darkened opening to the dragon’s lair? What is your purpose?
Let me make this absolutely crystal clear: There is no reason for you to be there at all—ever—unless you are there to slay a long term care dragon! This is not about life insurance or annuities. It should only be about cutting off the head of the long term care risk. And somewhere along the journey to the mouth of that cave you must ask yourself, “What will this cost?” Yes, combo intent can potentially solve two problems. However, if used for its purpose, the other element is simply no longer available. In other words, if you kill the correct dragon, other distractions are wasteful and, frankly, superfluous. What must always remain the focus of your sacred quest is to vanquish the dragon with the least waste of effort or expense. What is the most cost-effective method of slaying dragons? As with any insurance risk the shortest distance between two points is always best. I want to drive my sword directly into the heart of the beast.
Other than that I have no opinion on the subject.
