Friday, March 29, 2024
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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.

Forest Firestorms

Firestorms in the Pacific Northwest (Payroll deduction mandates) have blanketed our nation in smoke. Climate change (and COVID-19) reality have become the new buzz words for a clear understanding that we cannot go back. If there is an opportunity to change our future the reform must be profound and acknowledged as incremental and based on what we have learned from the conflagration. In recent conversations with knowledgeable cohorts in the struggle to at least bend the curve of long term care planning I have agreed to confirm my membership in the “Eternal Optimist Fraternal Association.” However there are some important caveats:

  • Lack of meaningful success in reducing the risk exposure of America’s baby boomers and the continued lack of a viable plan to acknowledge and confront cosmic deficit caregiving contingencies must now finally fall squarely across the paths of both public and private attempts to ameliorate the sure and certain knowledge that we as a nation are totally unprepared. Politicians have failed. Political accommodations built on revenue neutrality have failed. Academics, focus groups, think tanks and, yes, consultants have failed. The insurance industry as a whole has failed. Commitments to education and training have failed. The opportunity for those most at risk to find respite from the brewing storm has failed. Consumers continue to insist on misunderstanding the risk or the real cost of addressing that risk.

There is also a short list of those who have not failed :

  • The long term care specialists who never surrendered when support for their efforts began to fall away from them in all directions. The group brokerage community that continues to scramble to find product to deliver at the worksite. Those wholesale brokerage distribution institutions that have only turned around long enough to ask for more ammunition and simply keep firing with dwindling reserves and no real hope of overrunning the enemy wearing away at its flanks.
  • The Actuarial Community—those magical alchemists who were never provided with adequate primal ingredients. They did the best with what they were given. The job was always bigger than advertised and corporate enthusiasm for the work was never overwhelming.

Why we have continued to ignore the nose on our face has always amazed me. The model for what must be an obvious compromise between government mandates and private insurance solutions is certainly the intimate and successful marriage between Medicare and supplemental options to maintain personal responsibility, participate in the risk and reduce consumer cost to manageable levels. Guaranteeing an adequate level of program participation and therefore allowing affordable “gap” insurance, I would humbly submit, may have been the blueprint for reform all along.

Now there is smoke and there is fire. Evacuation orders to retreat to a new line of defense are drawn and pending. Please stay alert! Major structural changes are imminent; the landscape left after the fires burn out will not be the same. None of these smoldering fires or burning blazes are under control as this goes to press:

  • The pending WISH ACT is a classic stop-loss approach. Basically after a floating one to five year elimination period cash would be provided on a means tested basis eliminating catastrophic risks for those in the program. Funded by employer and employee tax sharing. I do have some difficulty seeing the government as a caring reinsurer.
  • $400 billion is still on the table in Washington for caregiving enhancements, Medicaid expansion and “Infrastructure” semantics. Although removed from bipartisan legislation it is alive and well in reconciliation debates.
  • Finally, the absolute confusion and potential for expansion of what is certainly a wildfire in Washington State is very concerning. A mandate of participation based on increased employee taxes is very problematic.

At this point, I am simply asking that you pay attention. The “conversations” are not necessarily bad ones but without your voices they could all go easily astray. Just so we are absolutely clear—the only voices I completely trust are those that read this column. These fires will leave a mark. I will do my best to keep you informed and forewarned.

Other than that I have no opinion on the subject.

Pendulums And Teeter-Totters

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.

Compensatory Education

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.

Teaching The Three R’s

—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.

Out On A Limb

Maybe it’s as simple as just “Follow the Money.” Maybe it’s not about bloated premium thresholds, restrictive underwriting barriers, short-changed benefit definitions, efficacious training techniques, carriers that forgot they are in the risk business, advisors efficiently continuing to hide from the battle or intransigent consumer blindness. I was recently asked yet again to condense my thoughts about the future of the long term care planning market. A market that seems to continue to drift into dead end activity cul de sacs where premium may sit and spin but does not expand into a greater sales environment. Specifically, how can we return to providing protection for those truly at risk? So as someone who chooses his words carefully, here goes:

“Stay at home if at all possible, focus on quality private managed care regardless of the funding source, leading to a supplemental risk solution.” We are indeed all in this together.

  • Risk amelioration works best when layered—public, private, corporate, payroll, reinsurance—each helping to create stacked specific and aggregate. It makes no difference who is on top or bottom or in the middle. The problem must simply become more financially manageable for many more Americans.
  • Virtual underwriting seems capable of binding a million of term life from the consumers phone and several current payroll deduction combo life plans are available guarantee issue. Why can’t we limit and define smaller bites of this risk? Why can’t the strength and comfort of “at work” or “black box” underwriting concessions find their way to the stand alone corner of our sales universe?
  • My suspicions are that we have not exhausted the structural benefits of joint underwriting philosophies. For the most part why do we continue to place equal amounts of insurance on a couple when the chances of two catastrophic risks are extremely small?
  • Why do we continue to view the risk as a level playing field from the inception of the sale when we know the risk is initially basically dormant, very gradually picking up speed with age, and ending with a claim spike at the very end? Why do we continue to sell level premium and level risk? Why doesn’t risk and premium follow the reality of the problem?
  • For years my children, and more recently some of my younger colleagues, have suggested that changes in our technology, distribution and advisor base may have snuck passed me in my sleep. Perhaps the most frequent observation concerning my loss of touch is that too many advisors only care about assets under management. When Voltaire was asked if he believed in God after a lifetime of opposing the Catholic church, he answered that he could not imagine a watch without a watchmaker. I cannot imagine any financial plan completely exposed to a potentially catastrophic and ever present contingent liability without some attempt to understand and effectively plan ahead. I strongly object to those who intentionally ignore reality regardless of their age.
  • Our market continues to paint itself into a corner. Perhaps unintentionally but none the less limiting sales growth to the most affluent clients. Product support and compensation for the hard work of explaining the necessity of this risk have removed us from our original mission of providing protection to those truly at risk. The most recurrent theme, and I would suggest heartfelt commitment, is to a renewed market yearning to return to again helping the middle class avoid dependence on the government, family and loved ones.
  • Now, I must ask one for future thought and to determine if anyone is still reading. Recent rate increase actions have been offering a cash settlement as one alternative to lapsed coverage. I welcome the option. But it brings up a very interesting money question. Those settlement dollars are individualized based on the premium reserves of the individual policyholder. The question that should arise in your mind is: Who do those specific reserve dollars belong to? Although you cannot access those dollars, the company can basically offer a return of those dollars to you on their terms. Let that sink in. Now ask yourself: If my client takes a partial lapse in the form of reduced benefits at the time of a rate increase, where did the released reserves go? I’m confused.

If we do not revise our goals and break free of our misconceptions, we are most certainly doomed to history remaining in a time loop.

Other than that, I have no opinion on the subject.

Getting An Education

It seems that asking the right questions of those most intimately involved in a particular activity would qualify as one of those proverbial “no brainers.” You might think this would be especially true concerning the mystery of our continuing sales deficit in reaching any reasonable level of critical mass in convincing consumers to accomplish some forethought when it comes to long term care planning. Or to put it in my provincial hyperbole, even though we have picked through the field numerous times there is still pickable produce as far as the eye can see. Which would suggest there remains an abundance of opportunity for sales. In my humble opinion, as expressed frequently in this column, the emotional and financial conflagration caused by the need for custodial care remains the largest unprotected and, therefore dear readers, the most undersold risk in America.

The recent research (Who Is Selling What? To Whom, How and Why?), conducted by Oliver Wyman and Ice Floe Consulting and reviewed last month in Broker World, was designed specifically to ask the agents and advisors closest to potential sales what they thought contributed to greater success. What could be done to improve sales performance and help many more protect themselves and their loved ones? Reminding everyone this is an opinion column, let’s dive directly into what this columnist thinks the research told us loud and clear.

First, as we know, we are rapidly aging out in our chosen profession with 85 percent of advisors participating in the survey over age 50. Even though it is propitious that the average age of perhaps the most opportune demographic to be selling to coincides with those on the front lines trying to complete the sale. Even though it has been observed ad nauseum, we simply must recruit more younger troops. Adverse underwriting conditions and expensive premium thresholds continue to turn away far too many at the door. Why would anyone wish to sell a product where half of your submitted sales were certain to be declined, and the first reaction of every potential customer was to faint at the sight of the premium?

The most important takeaway from the survey was an understanding that additional education/sales training would be welcome and critical to building sales success. It was specifically because the survey was designed to examine, in as much detail as possible, the forces at play at the point of sale that a roadmap for future training was illuminated.

This column will continue to try to interpret and capture the most significant components of building sales success revealed by the survey.

The stakeholders interest in future training success falls comprehensively across all company and distribution platforms. At this point let’s begin with an inventory of advisor perceptions, contributory sales themes and training strategies revealed:

  • Survey participants were incentivized to complete the survey by promising that the cumulative results would be provided to all who completed the survey on a purely voluntary basis. The survey respondents were therefore a cornucopia of professional approaches to the sale from CPA’s to Medicare supplement specialists. The common denominator was that regardless of their approach to the sale it began by simply including the importance of long term care planning in their professional practice. This is the point of entry and recruitment. This is the key ingredient to market expansion. The risk must matter!
  • Three-fourths of agents admitted they primarily work an upscale market but they also overwhelmingly agreed that future growth must come from more middle class sales. There was an understanding that we must return to helping those most clearly at risk. The intrinsic knowledge that this frequently voiced mission will require reducing cost, which consequently requires a reduction in benefit, was understood. The survey revealed there is fertile ground for a different approach to sales growth as only five percent of those surveyed approached a sales opportunity with a total insurance risk replacement proposal. Nearly 95 percent were presented as partial risk replacement. Less can be more, and training to enforce a greater coinsurance approach needs greater emphasis.
  • Difficulties in combo life sales were also identified. Terminology itself begins the confusion. Health riders versus life riders still remains a significant source of consternation.
  • Advisors were well versed in the meaning of paying for a long term care planning option vs those popular ADBR options that do not require a current premium. A willingness to incorporate normative values of good and bad rider options needs to return to front and center in future training. Something is not necessarily better than nothing. Quality sells and training must shine a spotlight on the obvious.
  • The survey recognized that the shift from singular to multiple modal premium options dramatically increased access to more middle class buyers. Premium thresholds simply hold more significance with long term care planning.
  • Perhaps the greatest V8 moment in the survey was the role traditional policy review could make in future sales training. The absence of a planning option justified policy replacement among the great and vast majority of agents. The concept of adding living benefits to new sales has always been an additive concept, but the willingness to exchange up has not been adequately explored.

Agents/advisors look to their chosen distribution partners and primary carriers for sales knowledge as well as product education. No one can argue that we have not had substantial attrition in the ranks of those willing to make this sale. My usual Pollyanna wish of course would be that we could all work on recruitment and training together. At least we are beginning to see an outline of strategic directions to improve sales and a concept emphasis that could lift all boats. More and better trained troops is a no-brainer.

Other than that I have no opinion on the subject.

Strategic Thinking

Periodically it just becomes necessary to go to the blackboard and wipe it clean. New advisor focused research is being released this month. Who is Selling What? To Whom, How and Why? is a follow up advisor survey to work reported here in May, 2004, at the apex of stand-alone traditional sales. The Producer’s Perspective on Long Term Care Insurance was accomplished at that time with the help of LIMRA International, the Society of Actuaries and Broker World. Times have changed—today basically 90 percent of any version of long term care planning sales are now classified as “combo life” sales, and it was simply time to again ask questions of those closest to the actual sales transaction. The current project was conducted with extensive help from independent and career distribution (NAILBA and NAIFA), BGA’s, NMO’s, combo life companies, The Center for LTC Reform and Broker World. The survey was sponsored and conducted by Oliver Wyman consulting actuaries and Ice Floe Consulting marketing and distribution consultants. An ongoing discussion of the findings will be a foundation of this column for several months.

We knew that we would be refining existing perceptions and evaluating best practices. It was the nuances of motivations and predispositions with consumers at the point of sale that we wished to hold up to the light for examination. Most importantly we wanted those insights to originate with those who at the point of sale actually bake the cake and make a sale happen.

It’s of course the most potentially global revelations that arrived in our minds on a purely speculative basis that need to be examined first. The survey itself is “data rich” from a statistical standpoint. It will be here in this “opinion rich” column where we can have fun with what it may all mean.

Let’s begin by saying we simply need more of this advisor focused sales analysis. Prior surveys have examined consumer wish lists prior to purchase and then measured rationalizations as to why a particular benefit was popular after purchase. These are opposite ends of a polar sales spectrum, one tainted by adverse selection and the other by cognitive dissonance. What we need to know is what happened in the middle.

In terms of those who eventually acquired any form of a long term care planning product, our overall placement success over the last 15 years has fallen by 50 percent. Traditional stand alone has fallen by 95 percent and more than half of the combo life sales do not involve any additional premium. Each year we continue to restrict our sales to the most affluent. From a distance it appears the sales of which we are the most proud could be perceived as unnecessary. We all know we must return to protecting those actually at risk. Without a full blown and well-orchestrated attack on the Mass Middle market we simply become a progressively superfluous exercise.

The first step in the right direction involves institutionalizing long term care planning in your practice. If you engaged in “the conversation” and merely offered something, frankly anything, we are all off to the races.

Jumping off the graphs of the survey was a clear and heartening recognition by producers that, while cost will always matter, the quality of the benefit offered to their clients was first and foremost in their minds. For example, zero current premium chronic illness ABRs were recognized to add something to the sale, however they overwhelmingly preferred benefits that could be defined as valuable at the point of sale and therefore required an additional premium charge as best for their clients.

What is old and should be ingrained into all sales is the necessity of periodic review. Changes in need, product performance or the advancement of available benefits must be a component of a successful insurance practice. The survey revealed a recognition by advisors that the presence of a long term care planning option, specifically both 7702B and 101g riders, has sufficient gravitas to justify a policy replacement conversation. This potentially represents an enormous opportunity for future sales activity.

Some answers we already knew or strongly suspected confirmed universal truths that must no longer be glossed over. Consumer and advisor awareness has always been the answer. The survey suggested that consumers do have a greater understanding of the risk and the choices to respond to that risk. And those advisors who include long term care planning in their practice are best prepared to facilitate financing decisions.

Yes, there is frustration with continuing rate increases, restrictive underwriting and insufficient product to be able to reach a larger audience. Our time has not been wasted. We should be fairly certain that by now we have uncovered our mistakes and have moved to remedy them. The survey tells us we do have a well trained and passionate advisor base and that we must now finally work together—advisor, distributor and company—to rebuild our dedication to training, education and outreach to more consumers and advisors.

Other than that I have no opinion on the subject.

Actionable Intelligence In Long Term Care Planning

Who’s Selling What? To Whom, How And Why?

The relative and apparently inexplicable success or failure of long term care insurance sales has persisted as a frustrating mystery for too long. The ability to reliably gain additional sales momentum and build upon successful sales results continues to defy the most empirical or deductive reasoning. The industry has repeatedly tried to examine prospective consumer predispositions to buy and then subsequently carefully examines consumer rationalizations of those who have taken definitive action to protect themselves and their families. Unfortunately, as you hold this kaleidoscope up to the light, we seem to have forgotten that it is the advisor that has the greatest influence and understanding of the patterns finally projected.

Last year, Oliver Wyman and Ice Floe Consulting, LLC, embarked on a joint effort to uncover and understand attitudes and opinions of the agents and advisors who, despite these challenging times, continue to discuss long term care planning with prospects and clients. The research reported in this article has been supported by a wealth of industry friends. Insurance companies, distribution organizations, professional associations and the media have stepped forward in an effort to enhance our understanding of the future of the long term care planning market utilizing all the tools at hand to help leverage care provision alternatives.

Refinement of the Who is Selling What? To Whom, How and Why? Survey was provided by the following insurance companies:

  • John Hancock
  • Lincoln Financial
  • Mutual of Omaha
  • Nationwide
  • New York Life
  • Northwestern Mutual
  • Pacific Life
  • Transamerica
  • Securian

National professional associations that stepped to the plate to support the effort include:

  • NAIFA
  • NAILBA

Industry trade media support came from:

  • Broker World magazine
  • Center for Long-Term Care Reform
  • NAILBA Perspectives

And of utmost importance, was the support and marketing efforts put forth by our colleagues on the distribution end of the equation, including:

  • Art Jetter & Co.
  • Borden Hamman
  • CPS Horizon
  • Long-Term Care Insurance Partners
  • The Marketing Alliance
  • LTCR
  • MasterCare America
  • National Brokerage Agencies
  • National Associations of Independent Agencies
  • National Long-Term Care Network
  • The Brokerage, Inc.

These companies and organizations helped us create a representative sample supplementing the generic master list of 400,000+ licensed life and health agents we would reach out to.

We need to emphasize that the current survey data is specifically agent/advisor centric. The desire to be vicariously present at point of sale helps us identify successful sales techniques and further product innovation. The sales success focus began here in Broker World magazine in May 2004 with the release of “The Producer’s Perspective on Long Term Care Insurance.” Hagelman Consulting facilitated this original work at the height of stand-alone sales with help from LIMRA and the Society of Actuaries. Changing the focus to the advisor’s views of what convinced the consumer to buy did provide an alternative perspective prevailing consumer research. In previous surveys when consumers were asked the most important considerations when purchasing long term care insurance, they identified their excellent judgement in financial matters to protect their assets. Advisors however overwhelmingly identified the consumers’ personal experiences with caregiving as the greatest factor in buying.

The transition over the last 15 years to a world in which 90 percent of all long term care insurance planning solutions are defined as combo life demanded a return to the agent’s perspective. It is our hope that with the continued support of our many long term care planning colleagues that on-going successful analysis from this viewpoint will become a permanent feature of ongoing research into best practices for sales success.

There is much data present in survey responses that helps us understand current practices and perhaps redirect product offerings by fine tuning sales efforts. Highlights of survey findings include:

  • An equal proportion of respondents start the long term care planning discussion by leading with a long term care need and those who incorporate it within an overall financial planning process.
  • 85 percent of respondents were over age 50
    • 59 percent were 60 plus.
  • 75 percent focus on an upscale market.
  • 87 percent include long term care planning in their practice.
  • Only 12 percent of those surveyed described themselves as exclusively long term care specialists.
  • Survey respondents equally preferred stand-alone and combo as their product preference.
  • Although there does seem to be a degree of confusion as to product features, particularly the difference between IRC 7702B and IRC 101g riders, 85 percent claimed to be comfortable discussing all product options.
  • The greatest product comfort level is with stand-alone policies.
  • The greatest discomfort is with chronic illness accelerated death benefit riders.

The 2019 LIMRA Combo Life Report found that 59 percent of all long term care insurance planning options sold included “zero premium riders.” In our survey:

  • 67 percent of respondents do not believe these riders help them close more sales.
    • The remaining 33 percent consider it an important feature.
  • Concern over IRC 101g ADBR’s utilizing the discount or lien method of benefit access raised concerns over professional liability.

Respondents indicated that little happens until the long term care planning conversation is initiated.

Consumer awareness enhances a proactive sales effort.

As previously mentioned, 81 percent of respondents proactively engage consumers in a long term care planning discussion. However:

  • 26 percent stated that consumers raise the issue first.
  • 42 percent indicated that consumers raise the issue more frequently than they do.
  • 40 percent indicated that consumers frequently ask specific questions about “financing” the long term care risk.

Understanding consumer buying pre-dispositions that facilitate a sales opportunity, as perceived by advisors, points to the prospect’s prior personal experience.

The second most expressed consumer motivation was a desire to avoid dependence. Protecting assets was a distant third.

One of our survey’s primary missions was to determine what “power phrases” get consumers to “yes.” They include:

  1. Peace of mind.
  2. Desire to age in place.
  3. Concern pertaining to the high cost of care.
  4. Personal knowledge.
  5. Running out of money.

Best practices as it pertains to policy review provides an optimistic marketing landscape for future sales opportunities.

Policy review is a balancing act between existing policy performance and enhancing quality long term care or chronic illness benefits.

Perceived quality of benefits, at the point of need, is an important aspect of current sales. Policy features that most enhance consumer purchasing interest are:

  1. Available policy features and options
  2. Premium rate guarantees
  3. Inflation protection
  4. Company experiences with long-term care insurance
  5. Joint policy or benefit pool
  6. Financial ratings and reputation

We have witnessed the market shift to combo life policies. With this comes an increased awareness and understanding of the value of a 1035 Exchange.

Additionally:

  • 85 percent of respondents consider adding a chronic illness or long term care benefit rider is in the policyholder’s best interest.
  • 79 percent say their policy review conversations with existing clients includes adding policy benefits covering long term care costs.

Three additional important takeaways from the survey include:

  • Agents/advisors realize that future sales growth will come when products become simpler and more affordable to the middle class.
  • Price (affordability) matters as much as meaningful long term care or chronic benefits.
  • Agents/advisors value the training they receive from their wholesalers and insurance companies. They want more.

Kudos for making this survey possible goes to Oliver Wyman and in particular Vince Bodnar, Carter Khalequzzaman, Elizabeth Hoch and Angela Cobble.

For complete survey results please go to the Oliver Wyman website www.oliverwyman.com/our-expertise/insights/2020/aug/long-term-care-planning-survey.html or the Ice Floe Consulting website www.ltcauthority.com.

A Fairy Tale For True Believers

Once upon a time, there was a Kingdom had not suffered any cataclysmic globalized wars or complete failure of its financial institutions for many years. This does not mean there were not close calls. This benevolent circumstance had allowed science, wealth accumulation and the overall quality of life to flourish. These privileged generations had evolved to become the most prosperous, innovative, creative proponents of maximizing freedom of will while demonstrating a boundless enthusiasm for democratic progress and accepting personal responsibility for the world and the people around them.
But like all fanciful stories the ultimate possibility for a complete happy ending remained just out of reach. There was a Flaw that persisted and festered in the dark corners of far too many hearts. The saddest component of the predicament was that they knew the truth that held them back but chose to ignore, obfuscate, diminish and outright deny the existence of a simple immutable truth: The march of time and the commensurate inevitable aging process cannot be forgotten, misplaced or altered. They knew that the beginning of life’s stages and the end both require some level of assistance, support, amelioration and please Lord some meaningful quality of loving care. Somewhere, somehow a dark and malevolent magic had befallen the population, the Flaw became a prowling uncontrolled risk haunting the meaning and value of anything that could be defined as a “happy ending.”
What makes this story so sad is that this precarious situation and looming threat had also been constantly under attack by a small band of caring patriots trying valiantly to establish the financial reserves necessary to prevent the virtually inevitable catastrophe waiting for the majority of the citizens of the realm. There remained a hard core cadre of care planning operatives working diligently to establish a responsive level of financial reserves to guarantee quality of care. The Flaw was insidious, clever and it seemed invincible, The harder they tried to soften the impending blow, the stronger and more resistant the inevitability of a pending financial and emotional disaster gathered strength—apparently just out of view. And then when it was clear that the potential for a very unhappy ending was on full display, a new enemy swept across all the borders. A Virus invaded their lives. It struck most viciously at those most vulnerable. The Angel of Death hovered over far too many homes and the Flaw stood exposed. It became impossible to not understand except, of course, for the most severely obtuse.
This new and virulent threat had penetrated the Flaw’s magical armor. Reality could not be ignored. The Flaw simply had no clothes.
A new future began to spread across the land:
A personal connection to a need for enhanced and personal care became a rapidly unavoidable truth.
It became clear that you did not need to vanquish the Flaw just manage its effect.
No one would forget that quality of care under personal control could ever again not be a planning option.
As the illness swirled around them “Staying at Home” became a necessity; the virus had installed a collective cultural memory that could never again be ignored.
The cognitive resonance necessary to take action and plan ahead moved to front and center.
As with all fairy tales hope, love and faith became again a reflection of the new truth that freedom of choice and personal control of the need for care could never again be overshadowed by the blinding ignorance of the Flaw.
Other than that we have no opinions on the subject. 

Who Is Selling What? To Whom? How And Why?

Actionable Intelligence in Long-Term Care Planning

When Oliver Wyman and Ice Floe Consulting embarked on our agent and advisor survey, called Who is Selling What? To Whom? How & Why? (WWWHW), we wanted to explore the salesperson’s view of:

  • Best practices in starting the long term care planning conversation.
  • Agent/advisor/consumer product perceptions and preferences.
  • Best ways to get prospects and clients to “yes.”
  • New product insights.
  • Types of training and education that will improve sales results.
  • Why many agents/advisors do not discuss long term care planning with consumers.

There is more to building a survey like this than meets the eye. Some of the issues we grappled with included:

  • Determining our audience; we needed to approach a large and varied swath of insurance agents, financial advisors and legal and accounting professionals who would share their views.
  • Identifying topics and crafting questions that would provide meaningful responses and actionable intelligence.
  • Deciding to “go long or short.” Surveys that want big numbers of responses are generally short. However, we wanted to get a complete picture of the topics involved. Therefore, we chose to “go long.”

To accomplish these goals, we contacted hundreds of thousands of licensed agents and financial advisors through various channels. With the help of Broker World Magazine, NAIFA, NAILBA, Center for Long-Term Care Reform, and independent life and long-term care insurance distribution, we “pounded the airways” with email outreach. Additionally, we purchased a list of 400,000 licensed life and health agents to ensure we had a representative sample.

As a result, we received tens of thousands of answers from over 600 agents/advisors who completed all or part of the survey. As of this writing, we are still analyzing responses and cross-referencing related questions to identify key takeaways. However, we can now share a high-level view of some data we have obtained.

Who is Selling?
There is a committed and well-trained group of agents/advisors that do take long term care planning seriously. While they may consider themselves “specialists,” do not confuse this term with “exclusivity.” The majority of survey respondents consider long term care planning part of a broader insurance or financial services practice, which may include life, health, Medicare, property/casualty, tax planning, legal, estate and business insurance, and employee benefits. These agents/advisors work with various distribution channels, with the majority in the “independent” category. Most respondents have been an agent or financial advisor for more than 16 years and are 51 years or older, with most being over 60. Interestingly, a significant number of survey respondents indicated they refer clients to a long term care planning specialist as opposed to handling it themselves.

Our initial takeaways from this high-level data are:

  • Interest in long term care planning cuts across many different areas of practice.
  • Numerous agents/advisors are aging out of the business.
  • Interest in including long term care planning in agent/advisor practice is wide but not deep.
  • Insurance companies and distributors have a major opportunity to focus younger agents/advisors on long term care planning.
  • Younger agents/advisors should consider this a “Blue Ocean” opening to expand their business practice.

What?
Let us start with a point of context. The sale of life insurance policies with long term care or chronic illness benefits have grown significantly over the past five years. It is important to note, however, that in 2019, 59 percent of all combo products sold included “zero-premium living benefit” riders.1 Life policies that utilize this form of chronic illness benefit provide indeterminate long term care planning value that isn’t generally apparent until time of claim. A majority of respondents expressed concerns over the professional liability issues inherent in selling “long term care planning solutions” without benefits that were clearly delineated. Additionally, they struggle with trying to explain “discounted” and “lien” methods of chronic illness benefit payment.

Our agent/advisor survey respondents clearly indicated a preference towards traditional stand-alone long term care insurance and combo plans that included long term care accelerated death benefits and/or extension of benefit riders. It does not appear that chronic illness accelerated death benefit riders with contractual language and benefit payment methods similar to long term care riders appeal to many agents/advisors. It is not clear from the LIMRA data which insurance companies are using updated best practices re the HIPAA claims qualifying definition. We believe this contractual language matters to agents/advisors and consumers. Agents/advisors also indicated the expansion of life combo policies offering recurring premium options have made these products more accessible to more consumers.

Our initial takeaways from this data are:

  • Utility and value of “zero-premium living benefit” riders are unclear to agents/advisors or consumers.
  • Agents/advisors prefer long term care benefits over chronic illness benefits.
  • Entry-level premium matters.

Who is the Customer?
Agents/advisors agree that the best client to have a long term care planning discussion with has had a family member who needed long term care and/or they have been a caregiver themselves. Cost of care, desire not to be dependent on family, and control over type and location of long term care services are key consumer motivators.

Considering that most of our respondents actively include long term care planning in their insurance and financial practices, it comes as no surprise that they proactively have the conversation with clients and have a high comfort level doing so. However, this comfort level may be exaggerated by our survey sample. A 2017 Consumer/Advisor survey by Lincoln Financial Group found that 28 percent of advisors found it difficult to discuss long term care with their clients, while only 12 percent of our respondents found it so. The Lincoln Financial Group2 survey reported that 76 percent of consumers would find it valuable if their advisor discussed long term care planning with them. Coincidentally, our survey respondents indicated that 75 percent of the time they raise the planning idea before their clients do.

Our initial takeaways from this data are:

  • Experiencing the hard truths of the long term care event continues to be a primary consumer motivator.
  • Proactive and systematic inclusion of the long term care planning discussion leads to sales success.
  • If the agent/advisor waits to be ”asked,” they either missed the sales opportunity or it is probably too late to help.

How–Best Practices–Is the Sale Made?
“Nothing happens until a sale is made.” These immortal words by Thomas J. Watson, Sr., speak directly to the proactive nature of sales success. With this in mind, we wished to determine if there are unifying practices successful agents/advisors use as they navigate consumers through the long term care planning discussion. Approximately 40 percent of those surveyed indicated the conversation began as a specific “dominant need” conversation. An almost equal number said long term care planning was part of their overall financial design process. Sixteen percent said the discussion was part of their life insurance review activity.

“Upgrading” an existing life insurance policy to include long term care or chronic illness benefits was a key talking point for agents/advisors. 1035 Exchange opportunities also came into play when appropriate. The top three client “screening” techniques continue to be health evaluation and insurability assessment, financial appraisal, and discussion of personal financial goals. Ultimately, however, the sale continues to be fueled by experience with long term caregiving.

Why?
As we have said in the corporate boardrooms of insurance companies, prior to a consumer purchasing a life or long term care insurance policy an agent/advisor must believe that risk is real and the product they are offering has value. It is clear from our survey that the respondents are passionate about long term care planning. Many own it themselves, have had long term caregiving experiences and believe it is the cornerstone of a complete financial plan. From our experience these are universal traits of most successful life/long term care insurance professionals. The big questions for insurance companies and distribution is: How do we imbue more producers with these attitudes and enthusiasm?

Takeaways for Another Day
As we analyze and correlate survey responses with the team at Oliver Wyman, a number of themes have percolated to the top of our list for continued consideration:

  • Confusion exists among agents/advisors about the nomenclature used to describe various combo products. What is the difference between combo, hybrid and linked? Is it time for the insurance industry to get together and create terminology accepted by all? Clarity should not be a rarity.
  • Even more confusion exists about the differences between IRC Section 7702b long term care vs. 101g chronic illness benefits. What type of training should we create to address the differences, advantages, and disadvantages of these two types of solutions for long term care planning?
  • Technology solutions offered by insurance companies get mixed reviews. Are we ready to examine what is working, and what is not, to make it easier for agents/advisors and consumers to access planning solutions?
  • No consistent “COVID-19 message” pertaining to long term care planning has surfaced. Maybe it is too early, but it seems there are several obvious ones that agents/advisors could be utilizing.
  • Agents/advisors continue to focus on the affluent market. However, the survey respondents indicated that expanding to the mid-market was of keen interest to them. What can carriers and distribution do to help create a larger playing field?

Stay tuned for more actionable intelligence from the WWWHW Survey. 

References:
1. LIMRA—U.S. Individual Life Combination Products Annual Review 2019.
2. 2017 Thought Leadership Research—Lincoln Financial Group Versta Research.