Ronald R. Hagelman

As a profession we can hold our own when it comes to the ability to ask, “What if?” Perhaps the word malaise works best to describe our chosen market. There seems to be some speculation that we are on a great new venture. That indeed things have changed forever. However a consensus as to the trajectory of this alteration in goals or approach seems much more illusory. Let’s try on a few of the open conundrums out for consideration:

• Looking back at the death to birth ratio as far back as the U.S. Census has records, COVID has provided us with a new and possibly permanent reversal of our fate and fortune. For the first time, deaths outnumber births. It is not only the dramatic increase in mortality but a commensurate decrease in birth rates during the Pandemic. Isn’t it, after all, the capricious nature of our mortality and the responsibilities that accrue with new life that creates and sustains our fiduciary marching orders?
• In a recent informal conversation with a Senior Actuarial State Regulator, a conversation about the level of activity concerning new long term care or chronic illness filings, the question of product or benefit relief rose to the surface. It appears that, with the exception of chronic illness ADBRs on life policies, the cupboard is bare. Nothing new or pending portends and defines an acquiescence in our market condition that should not be conducive to a good night’s sleep.
• I recently got my own annual long term care policy review. As frequently reported in this column, at the dawn of TQ Comprehensive Options I was sufficiently brilliant to buy a 10 pay, lifetime benefit, five percent compound COLA with indemnity payments. It will currently pay $417.89 per day or $152,524.85 annually. Does this strike anyone as, at the very least, the faint whisper of an incentive to claim?
• “Careful what you wish for” could never be more significant than with the simmering pot of idealistic reform brewing in Washington State. As expected, Governor Inslee has signed two new bills into law amending the existing establishment of a new social insurance program. House Bill 1732 and House Bill 1733. Under Bill 1732, the implementation of the new mandatory payroll tax will now go into effect July 1, 2023. The adjustments meaning benefits will not be available until July 1, 2026. Vesting however can now be graded for those born before 1968. Under Bill 1732 those disabled Veterans, those with non-immigrant visas, and those with a permanent out of state residence may be exempted. My prayers are that there may yet be additional revisions before the legislative session comes to an end in March.
• Establishing a mandatory revenue funding mechanism constructed with required employee or employer payroll taxes, founded on no pre-x, with an initial premium rich social insurance trust fund placed into the hands of even hopefully well-meaning politicians struggling with Medicaid costs in any state is precarious at best.
• Be alarmed, actually be very alarmed. There is a large white flag waving in the Pacific breeze. Acknowledged defeat in the face of overwhelming odds is acceptable even to my hard head. However, holding in my right hand my paid up potentially multi-million dollar policy demonstrates that our capitulation may be premature.

That empty flag is not the birth of answers, it is a graveyard of solutions.

Other than that I have no opinion on the subject

This column has tried for 18 years to simply comment from the grandstands about the pomp and circumstance of the passing parade. It was always an attempt to admire the vivid color and theme execution of the individual parade float offerings and not to pass judgement on the motivations behind the need to be in or out of the parade. This was to be the home of a contemplative analysis of normative values of truth, fairness, equity of access, economic justice and freedom of choice. In other words, go to your favorite flavor news wire service and drink your fill of current events. Here we would at least try to simply explore what it all means and where it might drag or push us.

Recent columns have unfortunately been forced to drift into a growing concern that a particularly flamboyant, politically extreme and disruptive market alternative is on final approach. This unique aberration is now developing with certainty and significant disregard of how its revolutionary presence may alter forever the long term care risk mitigation universe as we know it.

The implementation of the Washington State Cares Act has been postponed. A memo from the Washington State Democrats dated December 17,2021, confirms the temporary delay until the next legislative session is complete before April 2022 with premium collection in limbo potentially for calendar year 2022. Please allow the stated goals time to sink in: “Pausing the program so that it can better serve disabled veterans, military spouses, non-residents, and near retirees will improve the program.” And, “A pause will give the Long Term Care Commission the ability to study and make recommendations about residents who move out of Washington to retire and assure that those who opt out of the program maintain their private insurance solutions.”

The quote “It’s a poor general that does not have an adequate plan of retreat” has been so often used it’s source is uncertain. Its sentiments are not. Suffice it to say we cannot go back. There is no plan to retreat and frankly no possibility to fall back to a market that is comfortable and familiar. Going forward will necessitate what have been historically irreversible structural choices. What we here choose to accept or resist will dominate our market/product destiny for a generation. Will we live in a world abundant with recommended choices and free market decisions or one of mandated political control only allowing humble supplemental options from the sidelines?

• There is no possibility of the resurrection of past success as we knew it. Robust, comprehensive stand-alone individual accident and health policies have no foundation to build upon. To my knowledge there is no company or reinsurance appetite for a mass influx of this premium.
• The temporary gold rush of policies in Washington State which will now soon protect against intentional lapse immediately turned off the product spigot. Any possibility of this aberration igniting additional production windfalls will collapse that market overnight.
• COVID has altered the future permanently. According to a recent report from The Society of Actuaries, deaths have increased in particular among the disabled with 47 percent showing an increase in “active life and disabled experience.” Incidence rate for claims showed an early decrease but is returning to pre-COVID levels. The American Academy of Actuaries was quick to add they are concerned about future health and disabilities that may show up as caused by COVID. It is also worth noting that COVID deaths are predominantly occurring among those least likely to be insured.
• Institutional warehouse care, both nursing homes and assisted living, are experiencing a serious retraction. Close quarters, inadequate training and being structurally unable to quarantine or socially distance has for now moved the care market home.

Events on the West Coast require our attention. In addition, recent Supreme Court decisions on mask mandates could not have better illuminated the precipice of choice on which we are now perched. Government controlled and funded entities must comply with mandatory behavior fiat decisions. Free and independent business does not.

Do we now wish to live in a world of behavior recommendations (strongly incentivized) or inflexible government decree? Personally, it is very difficult to understand those who might prefer OHSA to be their permanent, omnipotent, omniscient parade Marshall.

Other than that I have no opinion on the subject.

The last several months this column has danced around a number of potential State and Federal initiatives which potentially could reorder the nature and content of our industry’s custodial care enhancement responses to what remains America’s most exposed personal emotional/financial risk.

In an effort to not step too forcefully on any political toes, left or right foot, this column’s thoughts shall try valiantly to remain insurance oriented. What is happening on the West Coast must however be viewed in some degree of political context. This is a rich royal blue state near other populous states of similar minded political views. The predominant party in Washington State has made it publicly crystal clear that this is a new Social Insurance Program. Meaning it will arrive with a well-recognized laundry list of required components:

• As evident in the name a “new” state run hopefully sacred Trust Fund will be established for that purpose. Medicaid expense offset will occur, and a substantial reserve should build up before substantial claims will appear.
• As much mandatory no-opt-out participation as possible will define the battle lines.
• All monies sourced perpetually by additional payroll taxes forever subject to political review and alteration (read increase).
• Benefits vested over time with limitations now and in the future remaining part of a political process.
• Exclusive control of all components of benefit eligibility and limitations, hereinafter referred to as “managed care.”

This one of a kind (for now) historic legislation was passed in 2019 and is at the time of this writing still scheduled for payroll implementation on January 1, 2022. The legislature meets again in January and we must all pray that common sense may yet prevail and a better crafted social experiment may be attempted. Today, in mid-December, there is substantial interest in revising the original structure. The Seattle Times may be your best source of current information. From what I can discern from current press, implementation of this program is expected to at least be delayed a year. There are a substantial number of impediments to a launch next month. The Governor is in favor of a pause in implementation but apparently cannot take unilateral action. A formal delay is now in the hands of the new legislative Trust Committee.

On their plate:

• In 2020 something less than 50,000 individuals bought a stand alone long term care health insurance policy across America. The dust is still settling from the avalanche of applications tempered by eligibility and underwriting to qualify for an exemption to otherwise permanent, mandatory participation. Regardless of the final head count, somewhere between 250,000 and 400,000 may have successfully rushed to hopefully own a private insurance alternative. Fear of either coerced cost or coerced public managed care triggered a fire sale that took insurance distribution’s breath away and caused the full retreat of product alternatives by the few remaining carriers.
• Permanent exemptions are possible if policies were bought prior to November 1, 2021, and approved by year end. The State has promised that all exemptions submitted by December 1, 2021, will be processed by month’s end. The problem: Apparently if you miss these deadlines and an employer begins withholding taxes, you are stuck forever.
• That forever tax will begin as .058 per $100 of income creating a potential benefit of $100 per day for 365 days—both will be subject to ongoing COLA adjustments. Benefits vest after 10 years with no more than a five year interruption or three of the last six years before they apply for benefits.
• Suggested reforms are clustered around three issues: 1) no portability, with benefits restricted to Washington residents; 2) No mechanism for new workers to participate or withdraw; and, 3) Older workers would pay with insufficient time to vest and receive any benefits.
• There is a citizen’s initiative to make participation optional (I-1436).
• There is a Class Action lawsuit declaring the law to be unconstitutional, discriminates based on age, and violates ERISA and multiple State laws.

Let’s speculate:

• Suspicions are that this social insurance experiment is under consideration particularly in many traditional blue states.
• The still pending federal proposed “Build Back Better Act” Medicare HHC recommendations have apparently been scaled back from $400 billion to $150 billion. Home care reform will continue to abhor a vacuum.
• You absolutely must ask yourself what does the precipitous carrier retreat from Washington State mean?
• The fear that those who did buy fire sale coverage in defense will simply lapse coverage as soon as the law goes into effect. Are the structural integrity of both companies and the new Washington State Trust Fund in jeopardy?
• Our long term care/chronic illness market is fragile at best. The companies are unprepared, unable, and unwilling at this point to respond to additional fire sales.
• We must ask ourselves what was the shape and dimensions of the thrown rock that shattered the glass of denial? A sustained future production windfall is highly unlikely. When our opportunity to protect the many is finally at hand, will we retreat from the battlefield?

Please tell me: Which social insurance institution, once established, was ever walked back? Fiscal temptation in any market is dangerous. Medicaid budgets will remain a hot spot in any budget discussion. Trust funds without immediate expense are extremely hard to ignore. Pointing fingers as to why this is happening is moot. The repercussions of this process will alter the future permanently. The British are coming—one if by land, two if by sea. Please keep your powder dry.

Other than that I have no opinion on the subject.

Be very careful what you wish for. The talking heads of your favorite news flavor are buzzing and the key words in the dialogue are disturbing. The political extremes vacillate between fear-baiting concerning a devious plot to stage an irreversible socialist coup and a vehement defense of the social equity necessity of accepting additional levels of centralized mandated enlightened management. What should of course consistently strike a discordant note is the mandatory participation component inherent in this entire spectrum of thought.

Simply as a placeholder, let’s begin with a popular source of memorable and profound quotations: “The problem with socialism is that you eventually run out of other people’s money.”—Margaret Thatcher

Social reform is always about mandatory participation, centralized management control and the commensurate reallocation of funding sources necessary to accomplish laudable egalitarian objectives. There is simply a huge and inevitable fiscal price to pay. Understanding the specific source of the need, the newly formed boundaries of the current and future incursion into our personal freedom inherent in that price is the intellectual exercise absolutely necessary of every caring member of our profession. We must all stop now and think very carefully.

I may be repeating this story but it lies at the heart of every column I have ever written. My grandfather died in 1976. My father was president of Guardsman Life and I was a learning disabilities teacher growing organic vegetables in rural Iowa. We both flew to Houston to help sort things out. My grandmother had arrived from England in the womb in 1898 and somehow had maintained very British mannerisms. She had a reserved and proper no-nonsense demeanor. She however was suffering from COPD. At breakfast with just the three of us, my father had on his best selling shoes and was strongly promoting a nearby condo that had a nurse on staff. Rudy Hagelman was a legendary closer. I was quietly eating my raisin bran and enjoying the show. When dad had exhausted his argument my grandmother set up even straighter and burned into my mind and my future in this profession the following: “Son, the garbage picks up on Tuesdays and Fridays. When the time comes, you may set me out. I will not be leaving this house!”

I will not engage in the national inoculation debate. I do believe science ultimately holds most of those cards. What we should all find disturbing is the consistent drum beat of “mandated social insurance compliance.” Insurance is about personal free will, personal choice and personal responsibility.

My grandmother got it all correct even though it drained her savings and the equity in her home.

The outlines of our brave new world are beginning to crystalize:

• According to a recent survey from LeadingAge, a group of nonprofit providers of aging services: “85 percent of Americans agree that now is the right time to think about building a better aging services system. Eighty-six percent say the government must make a bigger investment in services and care for older Americans.”
• Our President recently gave a speech to promote his pending “social infrastructure” legislation as he left for a global environmental summit in Scotland. The first argument from his lips was the need for expanded health care services at home. Please recognize that the proposed expansion of Medicare and Medicaid for the purpose of enhanced home care services is the majority of healthcare costs embedded in this potentially historic legislation.
• COVID has shifted the conversation permanently from institutional care solutions to care at home.
• The Washington Cares Act may end up being remembered as reminiscent of the emotions and conclusions of the Boston Tea Party. Governmental coercion based on new mandatory employment taxes leading to enhanced bureaucratic management control. We have seen one obvious fact that should not have escaped any of us. If exposed to the real possibility of having to pay for your own care is present, consumers will take action. Was what happened in Washington State coercion or incentive?
• The recent application avalanche in the Pacific Northwest should have reinforced this most basic of all insurance principals. As an example, I can’t help thinking Steve Moses’ thoughts on exposing home equity to long term care costs would solve the long term care insurance conundrum overnight.

The only care I want managed is equity of access.

Other than that I have no opinion on the subject.

It’s Not Just About Good Math, It Is About Meaningful
And Progressive Insurance Math

Positive sales results involve risks.

We recognize that good money management lies at the heart of insurance. That in a classic sense insurance companies are certainly sound financial institutions. However we also understand that it is our unique ability to manage and accept some level of risk that provides the meaning and the opportunity in what we do. Known and managed levels of risk acquired by the predictability of historical mortality and morbidity knowledge is the energy source that operates the machinery. To avoid risk is to avoid sales. Insurance companies are not banks or credit unions. The only question that matters in our view is: How much is enough? It is specifically the production thresholds mandated by this question that best predict success or failure.

A Crystal Ball
Product response to the largest financial risk faced by our battered Baby Boomers has been lengthy and varied over the last 25 years with the birth of tax qualified options. As usual the hind sight inspired notion that we oversold benefit and underpriced risk is an all too familiar lament of the post-game armchair finger pointers. In the past we built and sold based on all the issues, dynamics and strategy compromises outlined in this article. This particular risk has frankly been unlike any other in the past. Resistance to accepting the reality of this potential catastrophic financial train wreck has been legendary. The misconceptions about actual cost or likely collision with the real cost of care have been eroded by our marketing efforts but remain prevalent. The product ownership “love” of those who did buy expressed by unprecedented persistency never before seen in previous health product could not have been predicted. The drama of onerous rate increases, restricted underwriting and carrier retreat from the market has decimated faith in the current market by all its stakeholders.

New Market Development and a Path Forward
The risk is very real, 20 percent of Boomers will experience a catastrophic care event. A hopefully symbiotic relationship between public and private resources will be established funding care costs in America. Consumers still prefer to have assistance from professional insurance representatives. Private insurance options both primary and supplemental will remain available and essential as a product resource. Post COVID thinking will place emphasis away from institutional prejudices to home and community-based choices. Technology will play a huge role in managing care in the future and insurance will meet and support that challenge. A new renaissance of product options will continue to require meaningful math and dynamic sales support. The perennial relationship between those who bring in the money and those who count it will remain, as it always has, at the center of an ever expanding universe.

Underwriting concerns will continue to define the nucleus that impedes or expands our sales progress. In truth they lie at the heart of any care amelioration insurance strategy going forward. The immutable laws of an adequate spread of risk demand some form of coercion. The only way to accommodate preexisting conditions is to mandate sufficient participation. The current political climate is projecting this reality in a manner that should have us all concerned and on full alert. The one lesson that our past in marketing insurance solutions has made abundantly clear is that adequate voluntary participation concerning long term care risk has been simply beyond the reach of our industry’s product offerings. The battle lines are clearly drawn between public or private management of America’s largest unprotected risk:

• As of this writing seismic federal “social” infrastructure legislation is pending. It would facilitate a dramatic increase in Medicare home health care management and Medicaid eligibility.
• 100 percent mandatory employee payroll tax supported State managed social insurance originating in the pacific northwest would establish a new permanent mandatory social insurance bureaucracy. Currently under consideration by 20+ other states.
• Legislation has been introduced in Washington DC that would establish an employee and employer shared mandatory social insurance program offering means tested stop loss protection for major care risks.

The winds of change are building just off shore. The sirens song lure of mandating adequate participation and collecting new taxes establishing comprehensive government management of our care futures is achieving named hurricane status.

In our humble opinion, never before has the symbiotic relationship between marketing and actuarial been more important in building private insurance alternatives. One way or another we will be forced to go to the blackboard and begin again. Personal choice of care and at least private control of your claims destiny must not be the exclusive territory of political expediency.

What 30+ Years Marketing And Selling Long Term Care Insurance Has Taught Us: It is not just about good math, it is more importantly about meaningful math.

We are indeed at that proverbial fork in the road. Recent history and past performance precludes a future returning to business as usual. As our industry and our country heals and adjusts to current realities, my partner Barry Fisher and I thought now might be a good time to reflect on 35 years of product and distribution “consulting.” Our FAQ is: “What is it you guys do?” Unfortunately there is not a simple answer.

There is a special and immutable relationship between marketing art and actuarial science. The cumulative moving parts of a successful insurance company have several well established and defined disciplines. Administration, IT, underwriting, accounting and legal are all critical to success. However, theirs are, by definition, supporting roles. They will not bear the direct burdens of success or failure. Marketing and actuarial are symbiotic branches and are essential to any insurance enterprise. Both have been and forever shall be co-dependents. Even though the senior executive staff will make final “go” or “no go” decisions, they are primarily acting on information given to them by allied or opposing worldviews provided by actuarial and marketing.

Together actuarial and marketing create the bipolar nucleus that moves our industry forward. It is their combined working synergy that creates product, attempts to predict success and then subsequently measures and remains responsible for business quality and production volume. They must then intimately collaborate on needed adjustments. Together they are constantly challenged to temper good math with sales viability. Ultimately it is the marriage of acceptable levels of risk fused into sufficiently attractive product design that defines our mutual purpose and our industry’s future.

In medieval and renaissance times, kings had a variety of court jesters whose job it was to keep it real for the high and mighty. In our perspective it is often too easy to view sales concerns as comic relief to the serious business requirement of projecting accurate long term pricing assumptions. Therefore, our opening admonition is this: Just because you can make something work on a pivot table doesn’t necessarily translate into a successful product offering. As marketing and distribution consultants we are automatically identified as a voice representing the capricious nature of “the field.” We are asked to help identify prospective consumer purchase preferences as well as predict the potential enthusiasm of the agents and advisors who we ask to deliver premium on a regular and significant basis that satisfies all stakeholders.

Marketing and actuarial have historically represented the most experienced stakeholders in the insurance equation. It is specifically our depth of training and experience that places us in the center of the storm. We both operate in a known past universe of actuarial assumptions and meaningful sales success patterns. Marketing helps identify what consumers and advisors want tempered by what we know good math may actually allow them to acquire. Marketing and actuarial, in our opinion, represents the most ardent believers in the promise of what insurance offers and delivers to policyholders and their families. However, we suspect both recognize that our industry may on occasion fall short in providing suitable private insurance solutions to a broad base of consumers. Our view of how we can work together more effectively to enhance the opportunity for success by expanding our communal strength of purpose is the primary message of this experiential review.

Math or Altruism?
The symbiotic relationship between actuarial science and marketing art is also a reflection of the degree of ownership of our industry’s most sacred normative values. The certain, yet for the most part unpredictable, nature of mortality and the laws of large numbers creates the magic that is insurance. We must constantly hold the required balance between our fiduciary requirements of public financial trust up to the light of our stated altruistic goals to serve the needs of consumers. Surviving and prospering as a business is a delicate balance between risk and purpose. We may begin by protecting widows and orphans yet we also remain publicly dedicated to leveraging excessive risk associated with retirement, disability and health. There is a constant institutionalized internal requirement that as an industry we serve a greater good but that can only take place if it contributes to corporate health and wellbeing.

Good math surrounded by good intentions creates the permanent relationship between those of us held responsible for bringing in premium and those responsible for defining the basis upon which it may be acquired. This mandatory symbiosis must then draw water from the same well. We must together do all in our power to identify the consumer’s predisposition to buy, tempered by what the agent/advisor believes creates motivations to buy, and then a detailed analysis of what was purchased tempered by a careful determination as to why.

Customer Research Cannot Be Overdone
Who is the customer and what do they want? What is your strategy for listening to those directly involved in sales? What is your strategy to acquire consumer research? How does your offering, current or prospective, compliment or challenge existing sales or perceived competitor strategies? How do you think your new product or changes to an existing policy form will be viewed and adopted by the people you are expecting to represent your company? What is your strategy for developing sales intelligence pro and con in real time? All new product development will require some level of education and training; what’s your plan? What is your willingness to support and sustain a flexible and malleable learning curve before you accomplish your desired sales performance?

Perhaps the greatest protection against product failure is an advance determination of what combination of existing industry consumer analysis you will rely upon to make these most critical decisions versus your own efforts at research to determine prospective purchasing behavior. Again, marketing and actuarial will be called upon to provide their combined best guess. Together they will share a common purpose and fate.

Clarity, Transparency and Balance
Too often a clear and convincing reason why a consumer would want to purchase a new and improved version of a product becomes a victim of the urgency to get sales results. This rush to marketing justice is generally the result of C-Suite pressure to justify the corporate treasure associated with its birth. What problems or purposes is the new product or revision designed to accomplish? Was a need clearly identified when you went to the drawing board for the first time? Were the end-users’ needs and desires top of mind? As an example, it is safe to say that agents and consumers would prefer certainty; e.g. guaranteed premiums, clear and understandable benefits, ease of underwriting, transparent claim processing, predictable and reliable company financial bona fides. Is there a match between what you want and what you think your customers want? Will advisors and potential policyholders understand the method to your madness? Frankly any conversation that begins with “be sure to carefully read the fine print” should be suspect.

The devils are in the details. The base plan is simply a structural armature from which truly meaningful benefits have been strung like colorful holiday lighting. Is it long term care insurance or life insurance with a chronic illness accelerated death benefit rider? What are the benefit triggers and/or gatekeepers? Inflation options, nonforfeiture benefits, premium guarantees, possible dividend contortions, claims coordination, etc. will ultimately garner the greatest credit for sales success. Bells and whistles matter.

Again the evaluation of performance will return to the nexus of creative flexibility between marketing and actuarial. Success is often judged by trade-offs. Deal making on what benefits will not become victims of the cutting room floor should be a graduate level course. Marketing and actuarial should both arrive and leave every meeting as a measure of progress toward the “drawing board” goals. Actuarial and marketing have extensive wish lists concerning what they desire, what pricing limitations are mandatory and a knowledge of potential accommodations that may substantially impact sales.

When the marketing team arrives to negotiate with actuarial, they are prepared to compromise. Success may often be defined by how many requests can be sacrificed on the altar of corporate pragmatism and still preserve the necessity of successful sales. Expediency is not top-of-mind to marketing. There are two primary categories of product adjustments. The first may be best described as purpose and intent, and the second relative cost. An example of the first would be a conversation about how best to blunt the impact of inflation. This clear consumer benefit would lead most benefit wish lists. However, options to offset the ever increasing cost of living exist across a wide spectrum of approaches. Attempts to address the issue may include guaranteed purchase option, simple interest, step-rated increases or compound interest formula.

What makes the interaction entertaining and critical to future success is that these choices can be mixed and matched together in endless creative combinations. Subsequently each different solution will then be measured by relative cost. Marketing is notorious for trying to simplify this most important negotiation. They would prefer to view possible benefits included in base rates or riders as a percentage of premium. The initial product exercise was born with a general understanding of what level of premium would not create obstacles to sales. Generally speaking, single digit percentage increases to anticipated base premium may not jeopardize sales. Double digit increases will most likely raise our blood pressure.

Again it is the delicate balance between the initial product raison d’etre, restricted or policed by the projected math and then fueled by the strength of the marketing and sales campaign that defines every product exercise.

Revolution or Evolution
It is difficult to have this conversation and ignore the largest elephant in the product development room. Insurance is conservative by nature. It is important to acknowledge that the following comments are of a general nature. There are certainly moments in time and space where breakthrough innovation does occur (ex. the birth of universal life 50 years ago), however, for the most part insurance companies are followers not leaders. Our past product trajectory history is perhaps best defined by accommodation to market trends. When proposing new product direction or strategy the first question that frequently arises is, “What other companies have adopted this specific approach to expanded sales?” We would of course wish that the source of the inquiry is to evaluate the competition. Insurance companies are not banks; their ultimate success is not built from a lack of risk. The rationalization for examining the mood of an existing market is more likely to determine what level of risk the competition is willing to accept and still market forward.

Product evolution is traditionally gradual and incremental. It is a process of demand from consumers interpreted and voiced by agents. Insurance companies do listen to the field. And this constant bombardment of requests in product revision must again be filtered by the established marketing personnel who must then turn immediately to the actuarial gatekeepers to define what is possible. None of this ongoing process exists in a vacuum. All stakeholders at the company are keenly aware of what the competition has found to be successful. This is true from IT’s wish for platform upgrades to underwriting innovations in evaluating A1c levels. There has never been any respite from the need to change and evolve. Insurance product is not static, markets do evolve and consumer and advisor preferences must be constantly monitored and evaluated. Evolution is constant and product or marketing revolution is rare but not unknown. It is important to add that this industry’s universal opportunity to adjust to a changing sales environment is also frequently subject to significant influence from both political and industry regulation and legislation. In fact market changes are often, as an example, measured by their distance from the implications of specific insurance industry regulatory mile posts such as HIPAA or the PPA. It is specifically government and regulatory revisions or expansions that ultimately define the trajectory of future product premium growth. In our view it is again the unique mutual responsibility of marketing and actuarial that creates the impetus and the voice to upgrade the regulatory environment designed to facilitate consumer interests. Changes in life, annuity or long term care Model Regulations are a real time reflection of the need for change to improve fiduciary guidance and the opportunity for increased market objectives.

In addition it remains critical that we maintain an eclectic view of potential solutions. The classic example of marketing concept cross pollination would be to monitor sale activities which occur within a broader market context such as the development of worksite product or underwriting solutions. Worksite sales success is often a result of product compromise to accommodate blended mortality and morbidity assumptions based on enhanced participation and potentially accelerated lapse scenarios. Worksite sales success therefore traditionally may also reflect a reduced or abbreviated underwriting environment. It is specifically this product flexibility that may offer guidance as to individual product development. In our opinion a more rapidly evolving group market may provide guidance and context to evolving product trends. Another developing resource is the rapidly evolving virtual underwriting environment. Underwriting of senior products or long term care planning options is frequently defined by the degree of the absence of underwriting obstacles and the acceptance of virtual underwriting technologies.

No Plan of Battle Survives First Contact With The Enemy
Regardless of how brilliant and innovative an initial product introduction may be, its ability to accomplish projected premium objectives may flourish or wither once it meets the reality of agent and consumer acceptance. All the careful planning, market analysis, internal financial implications, IT strains and projected product introduction cost implications will not hold water if distribution or consumer predisposition fails to gain any meaningful traction.

It is also critical that you begin the sales journey with a clear understanding that there are always two bad numbers: Too much sales success and too little. This is the proverbial and mandatory Goldilocks principle. As marketing consultants the most feared question we know we will be eventually asked by our corporate clients is: “Based on the product parameters we have just helped assemble, what are your production projections?” Finding that middle ground sweet spot that justifies the development cost, promises the sincere hope of quality and meaningful quantities of new premium yet does not jeopardize current production or require supplementing unexpected reserve strength, lies at the heart of the whole process.

To be continued.

Are our times in transition, evolution, retrogression? Is our near term response to future caregiver preparedness potentially a new bull market renaissance or a bear market in full retreat? Is that noise off in the distance a stampede of hoofs or the thunder of crashing claws and paws? I only hear the faint squeak of a mechanical pendulum that must be approaching the apogee of it’s defined and limited arc and whose Newtonian necessity must be preparing to surge forward in the opposite direction. The sales reality of our chosen market is simply a burden we all carry. Our prognosis for the patient remains for most of us a fervent perhaps fanatical personal optimistic belief that the need is real and only insurance can make a difference.

We know something must ultimately provide the catalyst to effect change. The image that has the greatest resonance is the proverbial “what goes up, must come down” hypothesis. The human force and forethought necessary to balance and counterbalance a playground teeter-totter provides a much clearer model for consideration.

Just for fun let’s speculate on what might actually create bodies in motion:

• In 2034 older Americans will outnumber children.
• Every American will get caregiving on their boots as a caregiver or needing one themselves.
• Covid has left its mark on insurance. According to the recent 2020 LIMRA Insurance Barometer Study, one-third of consumers say they are more likely to buy life insurance. (Hopefully with a long term care planning option included.) The number rises to 48 percent when asked of Millennials. The desire to buy is at an all time high.
• Consumer awareness has become focused on the need to take action. Yet it remains clear that consumers need the greatest additional enlightenment concerning the true relationship between cost and value. The two greatest takeaways from this malevolent virus is the capriciousness of an early unexpected death and the desire to avoid an institutional setting for custodial care. I cannot imagine a greater invitation to explain the sound reasoning of providing life insurance protection that also provides the security of private care options.
• COVID has exposed the fragility of the inherent financial security of American families.
• COVID has galvanized the public’s perception of early, unprepared and tragic mortality. COVID has redefined the meaning and potential value proposition of staying at home.
• Although individual life sales have remained steady, life insurance sales overall have fallen slightly with the greatest reduction taking place in group sales as employer support was eroded by COVID. The group long term care planning market is limited by a cupboard that would have to be described as virtually bare. The insurance universe abhors a vacuum. Group product options will grow in the near term in response. Competition for employees always feeds that fire.
• It is technology and science that has risen to the occasion. This may actually be the location of that proverbial catalyst we have been searching to uncover. The mechanisms to maintain personal freedom at home have grown exponentially. Why not caregiver supervision with streaming Skype in every room? It seems a short step to caregiver stakeholder coordination managed by Zoom. I suspect this is where the renaissance necessary to reduce the costs of private care maintenance we have been missing may begin to emerge.
• Technology is also the answer to finally streamlining an underwriting process that can become an advocate for new sales not a perpetual impediment.

Pendulums must inevitably swing in the opposite direction, and teeter-totters require the least effort when the opposing forces are in balance. The global nightmare we have all endured may have actually helped create new momentum that can permanently effect change.

Other than that I have no opinion on the subject.

Intelligent, disciplined, optimistic and committed—the standing definition for any bright and shiny new school teacher. It was only when the reality of the pay set in that they often became “prime” candidates for a tangential career serving others but at a level to sustain the future education and careers of their own children. Many of us share a background in “teaching.” Teaching is, after all, the mandatory primary base line for sales. Let’s add one additional curriculum and instruction concept. Teaching concepts require constant revision. Frequently our initial understandings must be revised and refreshed. We need help. It’s OK. More importantly this truth falls across all participants in the sales equation, novice and veteran!

Therefore, cognizant of an alternate long term care planning reality concerning combo life sales, where should we focus future training? In no particular order of significance may I humbly offer my own views as to where training continue.

• The official entry to financial planning political correctness heaven is an acceptance of the validity of the custodial care risk. If you cannot accept long term care planning as a component of your fiduciary practice—education and therefore enlightenment is already beyond your purview.
• How do we best take advantage of what may best be described as a cosmic coincidence? The age and therefore concerns of advisors, and those of the potential buyers of protection are aligned—age, education, and income—perfectly coincidental. We are them and they is us. There is no need to project an interest, we are truly floating in the same boat: Butcher, baker and candlestick maker.
• Choosing sides in the traditional vs. combo debate is bad. Providing consumer knowledge about all the good and all the bad of all the choices is the only honest position.
• It would be nice if we could at least pause and come to some consensus as to what to call this market dominant symbiotic accommodation. LIMRA believes the most inclusive macro “tent” is combo life, however the nuances do require some training and understanding. As an example, cross breeding in genetics results in heterosis meaning the sum of the parts is greater than the whole. Asset-based product offerings could claim that the necessary interbreeding of two separate species is the only true hybrid. Putting that concept in perspective with adequate explanation of the marketing and regulatory history should be a component of sales training.
• There remains substantial confusion in the mainstream ADBR market. Is it a health appendage or a chronic illness life rider disguised as a health look alike? What to look for, where, and why, requires training.
• Each sale requires drawing a line in the sand as to where the majority of risk should fall the heaviest: The insurance company or as additional support for existing assets and income. Clearly this belongs in the planning conversation but where or when in that process will it be the most helpful or successful?
• The great and vast majority of chronic illness sales are sold with rear end load ADBRs collecting for the risk at the time of claim. Even if that is not bad, only differently expeditious and cost effective, clear and open training/education are mandatory.
• Consumers like the bells and whistles the market has added for sales sizzle. They like comparative shopping and the awareness of issues of inflation, institutional care shortcomings, and a now forever understanding that all planning roads should lead to managed care at home. Although these crucial conversations should be getting easier to initiate they also require more training.
• Policy review! Policy review! Policy review is a tried and true frontal attack on maintaining future viable policy performance. The lack of a long term care planning option may potentially open many new sales doors. Appearing on the front line of this battle plan should require adequate product/rider training to successfully compete in this perpetual combat.
• The two most historically entrenched obstacles to new sales, difficult underwriting and rate increases, have to some extent fallen off to the side. It may require intense education to get beyond these past impediments.

Teachers ultimately have limited innate natural resources with which to work. Innate curiosity is the primary well spring and source of learning energy. In our world it appears to be simply a hidden catalyst. We pride ourselves on our perpetual quest for expertise. Ours does remain a helping profession based on best practices. It is indeed concerning that to some extent we may have let our education and training support not receive the emphasis that it deserves. Teaching works in our world. We taught corporate premium deductions and sales rose. We taught streamlined underwriting for small groups and sales rose. We taught asset leveraging with a long term care kicker and sales rose. Teach more now!

Other than that I have no opinion on the subject.

—Reality Of Claims Progression
—Risk Definitions That Are Manageable
—Reform Goals That Are Possible

No need to convince anyone that education and training success is the only transformational course of action that can guarantee an alternate outcome. There is also no question that the wonderful world of long term care planning solutions is in search of an alternate reality. Identifying a clear course of action and proselytizing a solution that compliments current fiscal circumstance seems to be a dominant theme across multiple stakeholders. And not surprisingly that course of action requires lower premiums. Lower premiums can only manifest themselves as a reflection of reduced benefits.

It does disturb me that I must state the obvious. The marketing and to some extent distribution paradigm is not working as we would wish. The frustration is that we know we would all acknowledge that we have drifted into an “elitist” approach. And we all know what is missing. If these product options cannot meet the needs of those who are exposed to a possible catastrophic risk, and affordable insurance options are simply not priced in a competitive environment, we cannot ever expand, or some would suggest return, to our origin—the middle mass market. Why not begin with matching the timing of premium to the true nature of the risk? There is virtually no risk until the early 70s, beginning to hit serious claim curves by the early 80s. I know I’m over simplifying a complicated pricing exercise. But dear readers it is specifically that 15 to 20 year hiatus in substantial claims that has plagued our sales efforts. The only predisposition to buy is sourced at the generational interdependence of American caregiving. Unless you got the claim on you by association or proximity the problem is just too far over the horizon to visualize with any accuracy. All I’m suggesting is that it should not stretch anyone’s credibility if the pattern of premium payment could be more similar to the actual risk. Yes, you will pay more as the potential of a serious claim begins to materialize in real time. However mystery and denial of the risk also lifts like a fog from your understanding of the need.

Everyone cannot afford a catastrophic insurance solution. For those who can, a cornucopia of asset-based solutions await the savvy consumer with eye popping advantages.

Now let’s return to the most frequently pondered basic question: “How much is enough?” If we could just stop here, before we begin to evaluate need or ability to pay, and clearly name and identify the approach. Is your primary goal to replace the great and vast majority of the risk or to provide supplemental income at the point of claim? Both have the same purpose to maintain, perhaps even to suggest, a guarantee that the buyer will be able to manage their own private care—preferably at home.

Just as a frame of reference, the State of Washington recently passed long term care legislation based on an increased payroll tax. You can opt out if you own an individual policy but only if you take action before the new law goes into effect next January. No comment at this point. It’s only the benefit level that it will provide that deserves mention—$36,500 lifetime benefit. The conversation as to where we might eventually provide public assistance on the front or the back of the claim is a debate raging among all stakeholders. For now just let the limited amount provided serve as a measure clearly viewed by some as adequate supplemental protection.

Surely there are few who would disagree that we must reform our vision as to our basic goals. We have left far too many behind. Home and community based services will continue to expand exponentially. We will continue to do what we do best—leverage potential catastrophic risk or provide meaningful supplemental coverage to private or public funding. Suffice it to say that there are currently a number of public assistance strategies in development or pending legislation. They all have one common denominator—they will require our help to succeed.

Keep the Faith!

Other than that I have no opinion on the subject.