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Ronald R. Hagelman

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Ronald R. Hagelman, 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 and his partner Barry J. Fisher are principles of Ice Floe Consulting, providing consulting services for Chronic Illness/LTC product development and brokerage distribution strategies. Hagelman can be reached at Ice Floe Consulting, 156 N. Solms Rd., New Braunfels, TX 78132 Telephone: 830-620-4066. Email: ron@icefloeconsulting.com.

Elevator Speeches

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All any good salesperson needs is a lead-in conversation—one that is bright, perceptive, insightful, thought-provoking and basically nonthreatening. There is a legend in our business of the agent who made MDRT just riding an elevator in a large office building. He had only a few minutes to make his points and then asked for an opportunity to elaborate.

Optimism remains our life blood. In LIMRA’s “LTCI: An Industry Reflects 2009,”1 the top three reasons for optimism were (1) demographics, (2) increasing consumer awareness, and (3) opportunities at the worksite. The boomer age wave is upon us. Consumer awareness—formed from financial uncertainty and caregiving distress—is eating away at denial. Worksite sales—fueled by the need for alternative cost-effective benefits and liberalized underwriting concessions—continues to outpace the relative growth of individual sales.

Now, what should you say to connect to these growing sales? First, you must ask (if necessary ask over and over again):

Do you have your LTC insurance protection yet?

Every planning conversation must include the identification of retirement dollars. You must end the misperception that somehow LTC insurance is an optional expense. There is no choice. Your client must either take action to protect himself and his family or accept the responsibility if he does not.

You must speak firmly of the inevitable nature of the risk: You will get older, your health will change, and you will need care. Care is very expensive and it will be even more expensive when you need it.

I begin every employee enrollment meeting by telling the audience that my daughter’s favorite movie was The Lion King. At the core of this presentation is the circle of life concept. We enter this world dependent on others and the great and vast majority of us will leave it exactly the same way.

For potential clients who are by nature more analytical, operating on the assumption that you would not even presume to sell LTC insurance to others if you did not already own your own policy, tell them: You know, I had a $1 million problem. Do you? Now stop and do some fast math explaining current annual cost, current typical claim durations and what inflation does to that cost in 30 years.

Next, ask the obvious: Where will the money come from? Someone must pay! You, the government (with you as a welfare recipient), or insurance.

The all-time favorite is of course to go fishing for the caregiver connection. Ask these probing outcome questions:
 • Who will care for you?
 • Whose life have you chosen to disrupt?
 • Which family member will lift you, dress you, bathe you and change you?

A conversation about the changes in the law is always a good place to start. Begin this conversation with a neutral informational question: Did you know that the law has changed and your assets are now at risk? Next, discuss the Deficit Reduction Act of 2005 in a dispassionate academic manner, explaining the change in the transfer of assets regulations. This conversation may also then lead logically to an explanation of state partnership plans. Most are still not aware of the benefits of partnership plan ownership. This is also an excellent time to tap into resentment of government sponsored asset recovery. (I’m sure you don’t want the state to sell your home to pay your Medicaid bill.) The partnership sale is very straightforward:
 •  What is it in your life that you care enough about to protect from the state?
 • Is there any part of your legacy that you wish to leave to your children and grandchildren?

I have some new favorites as well. The Pension Protection Act and the availability of favorably priced and underwritten combo life and annuity products leads directly to these questions:
• Does your life or annuity policy pay for long term care if needed?
 • If I could show you how to protect your assets and triple your benefit values—if needed for long term care—without having to ask for new premium, could we at least visit?

And the new question that I now work with every day is based on modified guarantee issue thresholds as low as three lives: Where do you work?

With a sufficient number of lives, almost everyone actively at work, regardless of underwriting status, is eligible for LTC insurance coverage!

To all those veterans still actively involved in the struggle, as well as all those recently re-enlisted or newly recruited, please help yourself to this verbal arsenal. My hope is that it will immediately grab your client’s attention and begin the journey that we know will alleviate an enormous burden for them and all their loved ones.

 

Sources
 1. “LTCI: An Industry Reflects,” Jennifer L. Douglas, 2009. Over 80 executives representing insurers, reinsurers, producers and consultants provided LIMRA with their thoughts, insights and opinions as to the state of the long term care insurance industry, as well as with their predictions for where they see the market heading.

Enormous Commissions

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Over the years, I have approached the long term care insurance sale from more directions than most. These columns have continued to chronicle the historical evolution of our crusade to protect more Americans from the looming eventuality of an asset-sucking black hole. I have appealed to conscience, intellect, responsibility and reason.

Maybe I missed the barn! The often unspoken truth is that the great and vast majority of agents and general agents have simply chosen not to help. I don’t care how you measure the results, less than 10 percent of consumers have bought; but much more significantly, less than 10 percent of agents have made any real attempt to make the sale.

Let’s look at the numbers. There was approximately $500 million of new premium last year. Let’s optimistically estimate three applications per agent at the current average of $2,000 premium each. Even if you were to factor in group sales, we are still looking at no more than approximately 80,000 to 100,000 agents involved in trying to write an application. Recently I purchased a list of all the licensed agents in America, and it was more than one million names. Granted the list contains property and casualty agents as well as restricted captives, but what is clear is that only about 10 percent of the available agent pool is involved in upholding their end of their professional pact—to protect their customers.

My own rough estimates also suggest that fewer than 50,000 agents have had any kind of professional designation training and fewer than 10,000 belong to a professional LTC insurance organization. I doubt if there has ever been an LTC insurance conference that drew more than 1,000 producing agents, and I am afraid to even speculate on how many may have recently completed the 8 hours of NAIC/Partnership training that is required.

We continue to lament the excuses, rationalizations and denials utilized by procrastinating consumers. We continue to puzzle over the lack of clear thinking, acceptance of certain risk, and necessary forethought to do the right thing. Yet, if I’ve done my math right, 90 percent of the insurance professionals in America need to stand in front of a full-length mirror and ask themselves the same questions.

Now let’s see if I can paint a giant bull’s-eye on the side of the barn. There has never been a greater opportunity to help American consumers and earn a living in the process.

Begin with the obvious: There is no health product with greater persistency. There are no renewals more reliable. Read my lips: You can and will make more money selling LTC insurance.

Now let’s compound the obvious. Multi-life and group sales have risen steadily as a percentage of the business over the last five years. My own experience suggests that average premiums are in the $20,000 to $30,000 range, which also include exceptional renewals and growing re-enrollments from sales already in place. While I believe that to succeed in the multi-life market requires assistance from an LTC insurance brokerage specialist, the product is in demand at the worksite and provides a fantastic method to solve underwriting obstacles. The bottom line is that multi-life sales generate very significant and ongoing sources of commission income.

In my humble opinion, the Pension Protection Act will generate the largest commission bonanza in brokerage history. The new combo products arriving in the marketplace are, for the most part, asset-based, meaning on average six figures of initial deposit with substantial first year relocation compensation four to five times greater than an individual LTC insurance standalone sale. My suspicions are that most of this premium will be relocated from existing sales with a 1035 exchange. So let’s summarize: It looks like big new commissions will come, for the most part, from existing sales with no new premium commitments necessary.

Agents avoiding the long term care risk conversation do so at their own peril, both professionally and financially. In my own mind, suitability provisions in the NAIC Model Regulation guidelines clearly describe the necessity of explaining all LTC insurance risk leveraging options. In addition, the Pension Protection Act opens a new and expansive universe of sales opportunities.

All the excuses for not helping are going to evaporate. Enormous LTCI commissions will finally put fuel in the tanks so that we can move forward. The first time an agent sits out of the struggle and loses an enormous commission, or learns how to make an enormous commission, the LTC insurance sales conundrum will finally come to an end!

It’s The Mother-In-Law

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In a recent debriefing of a voluntary enrollment I was reminded of what may be the absolute best tipping point in the long term care insurance sales conversation. You must be patient, you must continue to ask probing questions, and then you must wait for it. It will come, someone will raise their hand and tell the infamous mother-in-law story.

There are always two pending firestorms in the event of a need for custodial intervention: one is financial and the other is emotional—both are potentially overwhelming. However, discussing the possibility (or reality) of having to deal one-on-one with a mother-in-law in need of assistance will absolutely galvanize the intentions of all in the room. In truth there may be no more powerful force in the known universe of family dynamics than the sheer force of the mother-in-law hegemony.

With the mere mention of a “mother-in-law in distress” concept, a hush falls upon all assembled. Grown men weep. Women avert eye contact so as not to confirm the presence of the elephant that has just entered the room. It is at this point that you must press for the sale. There is no better opportunity!

The mother-in-law caregiving dynamic may be the one family concept that transcends all barriers of denial, procrastination and feeble non-buying rationalizations. As we all know, you must first establish risk and then proceed immediately to call for action.

All consumer surveys have illustrated that the most direct path to the sale is finding a caregiving connection. Emotional stress compounded by financial entanglements seems to be the cultural definition of troubling in-law interpersonal relationships.

A couple of statistics illustrate why this is fertile ground for making long term care insurance sales.
 • Seventy three percent of today’s long term care is provided at home, mostly by family members (About Long Term Care at Home, Thomas Day, www.longtermcarelink.com).
 • Thirty four million Americans care for a loved one age 50 years or older, and half spend more than 10 percent of their own income, averaging up to $12,348 annually (Study of Caregivers, Evercare in collaboration with the National Alliance for Caregiving, November 2007, www.evercarehealthplans.com).

Further Findings from the Study of Caregivers

The direct financial impact of caregiving was examined and the study found that even though the commitment to family was made willingly, the cost was staggering.
 • Thirty seven percent of respondents had to quit their jobs or cut back on hours.
 • Caregivers saved less for their own children’s future; used their own savings; cut back on basics—clothing, utilities, transportation and groceries; and/or cut back on personal medical and dental expenses.

Even if it is only the stuff of social and cultural legend, most of us would probably view these issues differently based on family relationships with a genetic foundation versus those through marriage. This is not a mother-in-law joke. In truth, by focusing attention on the nature of the problem, our beloved mother-in-laws may do more to help protect American families from the devastation caused by a long term care event than any other factor in the risk equation. Find a mother-in-law story and you will find the sale.

No Class

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The Community Living Assistance Services and Supports (CLASS) Act, floating around Washington since 2005, has been cut and pasted into both the House and Senate versions of pending health care reform legislation. Although it is still unknown what, if anything, will be forced upon us, it is safe to suggest something will change.

A generation of legislation has attempted to provide incentives to American consumers to buy (HIPAA, DRA 2005 and the PPA); however, ownership of long term care insurance remains somewhere south of 10 percent. The incentives have not succeeded, and it appears that impatience, partisan politics and bad math are conspiring to create yet another social entitlement program to overburden future generations.

Why is this happening? There is a long list of false assumptions. It begins with a belief that the insurance option has not worked. Even if true, the critical concern must be to ascertain the cause. Begin with the notion that an insufficient number of agents sell or have sold the product. Those who do sell it recognize that it remains a difficult sale, and they understand that LTC insurance must be sold each and every time. In addition, a philosophical prejudice is embedded in the legislation that paying claims at home is inherently cheaper than in an institutional setting. With current home care costs running as high as $25 per hour, I am at a loss to understand this line of reasoning.

Yes, something must be done. However, this new entitlement monstrosity is not the answer. There are affiliated health care industries that are probably almost giddy at the prospect of open, easy cash flow such as home care or assisted living corporations. There are also voices within our own ranks that suggest that increased awareness of long term care needs caused by this bill is a good thing. This is not about good or bad anything. This is wrong. Wrong will always be wrong until it becomes law, then we will adapt and continue to do everything possible to protect our clients.

There are several structural issues and concerns that require careful consideration. The new trust fund created will book premiums for years before substantial benefits are paid. This creates an artificial credit against the cost of the health reform legislation and reduces the perceived cost of the legislation, creating a direct catalyst for its inclusion. The Society of Actuaries has concluded that the programs would be insolvent in 11 years. In addition, a nonbinding Senate vote mandates that the new trust funds can be used for this program only. No matter how you look at what some have called a “Ponzi scheme,” we are all being asked to simply have faith in yet another social welfare program.

The voluntary “opt out” enrollment provisions, making this a guarantee issue opportunity with a liberal definition of actively at work, will contaminate rather than encourage sales at the worksite. If you completely ignore adverse selection, you are no longer marketing insurance—you are simply prefunding a known risk. More confusion will be brought to the worksite in terms of what is being accomplished, what is actually covered and how much is enough. There is virtually no commission available from this program, which dooms any real enrollment success. Premium for long term care insurance will not sell itself. The size of the benefit of $50-$75 per day is insufficient on any level, unless perhaps it is being added to a Social Security check, to provide universal assisted-living admissions.

The proposed cash advance will coordinate with all reimbursement policies creating more confusion. Do you keep current coverage? Do you reduce coverage or only buy alternative supplemental insurance? The answer is leave realistically priced benefits in place and frankly, don’t change anything. We have always sold “supplemental” coverage. The numbers and thresholds may move, but the nature of the sale itself will not change.

The CLASS Act panders to the lies that have plagued us for too long: Insurance underwriting practices based on avoiding adverse selection are somehow undemocratic. Conversely, egalitarian offerings of universal coverage must therefore be inherently good. Besides, everyone knows Americans will always eagerly line up to protect themselves and their families.

The CLASS Act has no class. It is built from a solid foundation of hollow misrepresentations. It represents a wind tunnel of philosophical fantasies, false assumptions, monumental adverse selection, faulty pricing assumptions and a complete disregard for human nature. Other than that I have no opinion on the subject.

Reform

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Perhaps the most rewarding activity for insurance professionals is that we are able to spend an inordinate amount of time as students of human behavior. You might say we are witnesses and casual observers of the American consumer’s strengths and weaknesses.

The ongoing challenge of making more sales and the mystery of what motivates a buying decision is what keeps my engines running. Frankly, the challenge of the LTCI conundrum is what wakes me almost every morning. I really have only one line of business; thus, in order to maintain my sanity, I must also strive to maintain my sense of humor and enjoy my entertainment where I find it.

Recently during a large voluntary enrollment I decided to push the envelope a little at the employee group meeting. Traditionally we explain what we mean by long term care and how LTC insurance provides a reliable solution to a real and potentially devastating problem. We have learned it is best to approach voluntary enrollments with a classic assumed close. We have even gone so far as to fill in the names on the application and simply check off those who refuse to participate in this discounted employer-sponsored program.

My insurance career actually began in worksite marketing—I was a payroll enroller for permanent life insurance. Nothing has changed from when I walked to the front of the room almost 30 years ago and ended my presentation with a very strong admonition that if the attendees had not filled out the application to please turn it over and sign the declination of coverage. My next suggestion was—and still is—for those signing the decline to drive safely on the way home.

At one recent meeting we gave each employee a one-page form, an application for a personal interview with a declination of participation at the bottom, and sample rates for three options on the back. This very official looking declination read: “Decline Coverage—OPT OUT: I understand I have the ability to apply with reduced underwriting during open enrollment at my employer and I decline to apply for coverage. Please print name, sign and date.”

Several times during the 20-minute presentation I held up the form asking everyone to schedule an appointment during the enrollment period or to please sign that they chose not to participate. I emphasized that my enrollment partner would be at the door checking paperwork when they left. Before I disclose the results of my somewhat aggressive performance, I want you to know that the next morning the human resources staff who were present suggested that perhaps I had been a little “pushy.” Of course, I very kindly and sincerely explained that I only wanted everyone to have the opportunity to make an informed decision and choose to do what is right.

Now here are the very interesting results: Half of those in attendance signed up for an interview (not bad). The other half turned in the forms with their names at the top, but no one signed a declination. I had a two-hour drive home that evening and I laughed to myself most of the way. Those who did not sign knew it was wrong—they knew they were choosing to leave themselves and their families at risk.

Based on the questions I received at the end of the meeting some even had parents who had experienced the cost of long term care, and still they would not buy or admit publicly that they were making a bad decision. Most importantly, it was not a matter of cost—these were solid payrolls and very affordable benefit options.

One final note, I have been repeatedly asked to comment on the LTC insurance provisions present in both the House and Senate versions of pending health reform legislation. For the very same reason no one would sign the declination, the voluntary employer enrollment option outlined in the bill will not work! These provisions would, however, complicate our sales and confuse our course of action installing yet another educational obstacle to helping our customers protect themselves and their families. They will not improve anything meaningful and, to be completely honest, I’m not laughing right now.