This is after all an eclectic commentary column and it is not required to connect all the dots. We are certainly in a time of transition, upheaval and reexamination of all those previously held beliefs concerning the structure of product and basis for the sale itself. It appears nothing was sacred, which makes sense because apparently very little of what we have been doing was working well anyway. Like so many others I am trying to understand the changes in sales emphasis and product direction. How does the expanding universe of chronic illness risk management influence my practice and prioritize my planning to best serve my distribution?
Consequently, meandering through my current understanding of what’s relevant and what’s superfluous might be fun. Some of these random thoughts have appeared before—they therefore probably bear repeating. So in no particular order of importance here goes:
Americans know they have a problem. Recent retirement research suggests that two thirds of the populace believe that health risks will destroy their retirement. They have seen it first-hand—as not so coincidentally two thirds know someone who was financially decimated by the problem.
There are two sales: a primary sale that replaces financial risk with insurance; and a supplemental sale that is designed to preserve dignity and independence for as long as possible by “shoring up” assets and income already in play. We have actually succeeded fairly well at the first and failed dismally at the second. If we fail to protect the middle class from rigid government bureaucracy and the fate of budgeted warehouse care, the shame will haunt us for generations. If the private insurance industry cannot rise to this occasion it must seriously question its own relevance. However, to have any hope of success it must begin by focusing clearly on which sale it is making and how best to accomplish each separate and distinct goal.
Again recent surveys at the Center for Retirement Research at Boston College suggest that the odds of needing care are higher than we thought, although the length of care is shorter than we originally anticipated. Average nursing home stays were .88 years for men and 1.44 years for women. However, for those who do need nursing home care, 50 percent of men and 39 percent of women will need more than three years. Most striking of all is that after age 65, 44 percent of men and 58 percent of women will find themselves in need of nursing home care.
The risk is very real and those who choose to ignore the risk will pay a very high price for their personal cowardice in not planning for the inevitable! Even though it will be a manageable problem for most Americans, regardless of how you define severity, it will be a catastrophic financial debacle for a double digit percentage of those after age 65.
There are no “Easy Buttons”. The sale itself is hard and does not get any easier over time. The regulatory environment is dense and unfriendly. Adverse selection is present to some degree in every sale. Constant vigilance is required by all concerned.
The rapid rise of premium, which created a corollary decline in sales, has left a really bad taste in the mouths of many consumers. And for all those early adopters, onerous rate increases have disenchanted existing policyholders.
The landscape of future sales is transforming before our eyes. Any company that ignores the new market mantra of faster, easier and cheaper will fail.
We are seeing kitchen table sales recede in our rear view mirror. “Share screen” computer/phone sales are the most common denominator today. Every company has an electronic application, and paper apps may become a collectors item on the Antiques Roadshow.
We have inadvertently created an industry now resting firmly on a solid bedrock of false promises. Even if our past history transpired on a completely innocent basis, we still have a lot of explaining to do.
Fear drives this sale. Fear of disability, dependence, loss of control, asset depletion, legacy evaporation and government bureaucracy.
There is an unavoidable ethics component to this conversation. In my opinion the industry has not yet come to terms with its responsibilities in this regard. How does a company or an insurance professional avoid a conversation about this risk in a world in which there are such plentiful opportunities to deal with the financial devastation now available within every product genre—life, annuity and health.
Price matters, underwriting speed matters, access to technology matters and simplicity of design matters. Without these key ingredients present progress will not take place.
Combo sales are not a panacea and the new fulcrum in every combo life sale must be which sale are you making? Life with LTCI, or LTCI with life? And please explain how you can avoid annuity combos when they are clearly the lowest net cost for the risk…
My two hottest predictions remain on the table: 1) when interest rates rise, combo annuities will become the star LTCI attraction; and, 2) 1035 activity, both life and annuity, has yet to hit its stride but it will eventually.
Chronic illness ADBR 101g riders will continue to proliferate and improve.
This is the risk that will not go away. The industry will continue to try to meet the need with new and innovative product. We will continue to learn from our mistakes. Our insurance responses will be based on our cumulative experience. Both product and sales approach will continue to evolve and improve. We are no longer just staggering around in the darkness. We are knowingly meandering forward with purpose and resolve.
Other than that I have no opinion on the subject.
