A Peek Behind The Curtain

Looking At The Choices That Go Into Designing A Hybrid Policy.

We are always looking for new opportunities to combine financial expertise with purpose-based advice to bring financial clarity to our clients—both for where they are today and where they want to be tomorrow. We believe that money is a tool, not a goal. We also believe that everyone deserves a plan that invests energy in the things that genuinely drive them. True to that approach, we knew we needed an offering that aligned with our fundamental beliefs when we first began developing a linked-benefit solution. When Thrivent introduced its hybrid long term care policy, it came at the end of an innovative production process that carefully positioned our overarching advice-based philosophy on center stage.

While many carriers offer long term care riders for their life insurance products, those products don’t always offer the core benefits needed to provide robust protection for families that face a long-term care event. As with any major product initiative, many hands were involved in bringing our product to life, and careful consideration was made to craft a new solution that focused on long term care. To see how we got there, let’s take a peek behind the curtain to see how we made this policy a reality.

When we began writing the script for what we wanted out of this new product, we knew it needed to stand alongside our traditional offering, not replace it. This was so our financial advisors could have meaningful discussions with their clients about how each solution might help them achieve their goals. Since our financial advisors would be key in helping us implement this new product, we listened to as much of their feedback as we could. Their input made it clear that our new product would need to be as simple as possible while still maintaining a slate of robust benefits.

To keep things simple we adopted some similar features to our stand-alone product, such as consistent elimination periods: 0 days for home care and 90 days for facilities. This made it possible for clients to begin receiving care at home as soon as they went on claim while simplifying their decision-making process. They weren’t forced to weigh the pros and cons that come with electing an elimination period.

Another choice we made was to forgo the inclusion of a return of premium (ROP). While ROP can make for a great marketing tool, our data told us that they are very seldom used, as most long term care policy holders have an incredibly high persistence rate. However, our product still retains a cash surrender value which can provide some degree of offset for the lack of a ROP. For these reasons, we concluded that including a ROP would complicate the policy and not give our clients a tangible benefit.

Likewise, we chose not to include a residual death benefit rider. What we’ve frequently seen with other carriers that offer this type of rider is a death benefit that pays around five to 20 percent of the face value of the policy. While this can be great for clients who want to maintain a death benefit after they exhaust their policy, our product aims to maximize long term care benefits, and already offers a graduated life benefit based on the amount of long term care used. For this reason, a residual death benefit didn’t fit with what we were trying to accomplish. Even here though, we found a way to offset this by including an accelerated death benefit for terminal illness rider that allows policy holders with a life expectancy of 24 months or less to receive a lump sum payout.

Simplicity was only one of our central goals for this product. The other was to maximize the long term care benefit for clients through our advice-centered approach. This meant keeping things digestible for our clients and providing them options to balance premiums and benefits in a way that would suit their individual needs.

To achieve this, we included several ways for clients to pay their premiums including single pay, 10 and 20 pay options, as well as a pay to 95 option that allows clients to pay premiums up to the age of 95. Depending on their age, this gives them the ability to pay a reduced premium for a set amount of time.

Additionally, we applied the same thought process to our inflation rider options as well. We considered offering simple interest for a time but ultimately went with compounded interest as it provided the best benefit to our clients. We then opted to offer a five percent option for those seeking a higher payout and a three percent, 20 year option for those seeking a more affordable premium. We also offer a standard three percent option for clients if they want to split the difference.

Throughout this process, we focused on incorporating client-centric factors that enhanced options and simplicity in a thoughtful way. One such decision was to break out the pricing for our long term care and inflation riders. This enables our hybrid policy holders to deduct the long term care portion of their premiums from their taxes. This is not something they need to elect. It’s inherently part of their contract.

Likewise, we made our couples discount apply to the new hybrid policy and our traditional long term care offering as well. This discount can be offered in circumstances where one member of a couple may prefer the benefits of a traditional LTCI policy while the other feels they are a better fit for the hybrid. Regardless of how they mix and match their policies, they will receive a discount on their premium.

To ensure the product was client focused and based on advice, we created a unique comparison tool allowing clients to review their options and determine the best product for their needs by showing them what it would take to self-fund their long term care risk as well as illustrating different funding solutions within the same tool. This allows financial advisors to engage clients more easily in important conversations that are necessary for effective long term care planning.

Overall, these tradeoffs make for a policy that offers a calibrated balance of robust long term care benefits while simultaneously giving clients and prospects the leeway they need to create a long term care solution that fits their goals and budgets.

Clients have begun to recognize and appreciate the financial strength that’s offered by mutual and fraternal carriers across the industry, and these types of flexible offerings are now spotlighting their ability to adapt as well. As we continue to grow and evolve as an industry, this type of versatility will become an asset to organizations that are able to develop new products and features based on feedback from the field and their clients. Organizations that are best able to improvise to meet those evolving needs will be the ones most likely to receive a standing ovation.

Steve Sperka, FSA, CLU, is vice president of Health Products at Thrivent. Before transitioning to Thrivent in early 2019, he spent 25 years specializing in long term care with one of the leading carriers in the industry. During that time he fulfilled roles that varied between product development, operations, and distribution.

Sperka obtained a BBA from the University of Wisconsin–Madison in actuarial science and risk management before attending the Kellogg School of Management at Northwestern University to earn his MBA. He is a Fellow of the Society of Actuaries (FSA) and a Chartered Life Underwriter (CLU).