Ronald R. Hagelman

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.

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.

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.

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. 

First, LIMRA does a fantastic job evaluating our sales progress along all product discipline lines. For the most part our progress or retreat from a given market appears as a reasonable incremental up or down movement. The steady yearly fall over the last 17 years of individual stand-alone “traditional” LTCI has become an unfortunate fixture in the celestial sales firmament. Sales of any long term care planning solution, to include life combo and traditional, have been holding relatively steady at about a half million new buyers per year. And relatively speaking, individual LTCI has apparently bottomed out in 2019 at a little over fifty thousand new proud (and BTW extremely smart) owners of peace of mind inflation protection. We know all this only too well.

Please feel free to consider the following as just another “rant” as we absolutely must look at these numbers from a different perspective—a frequent contortion in this column. Let’s begin with what is sold versus what is simply placed. Please feel free to generalize about some very clear basics. You do get what you pay for in life. There is no free insurance. If we sell a benefit, we expect to be able to easily define and measure what it will be when it is needed most. Please hold long term care planning sales up to the light and look for transparency. Is it life insurance or health insurance both base and/or rider? If it’s a life combo is it a long term care or chronic illness ADBR. Now (drum roll ) here’s the big one: Did you pay for it? Or did it arrive at the point of sale gift wrapped in “no current premium?”

Now dear friends let’s drill down on the basics as we all know them. Long term care planning solutions come in a very few identifiable flavors and there must not be any co-mingling of structural differences.

• Traditional sales remain the shortest distance between two points. It is an individual health insurance policy. You pay for what you get, nothing else.
• Life combo is an either/or contingent benefit. It is simply a base life policy plus an option to have some level of the death benefit made available for long term care planning purposes.
• These Accelerated Death Benefit Riders are either a LTCI health IRC 7702B or an IRC 101g life chronic illness rider.
• Now you only need to add two critical ingredients and the pot is right: 1) Did anyone pay for the rider or was it “Zero Premium?”; and, 2) Did you provide for a mechanism to exceed the original death benefit…an “EOB” Extension of Benefit rider?

Now here’s the rub. The vast majority—59 percent of all sales in 2019 booked as life combo sales—were given away, not sold!

Please explain what sale you made if you did not collect a premium? What was placed was no charge until of course you actually tried to use the benefit.

Please tell me you understood that these illusive benefits may ultimately appear as questionable, maybe even re-underwritten or severely limited benefit dollars at the time of claim.

Before my “living benefit” friends get out the tar and feathers, please understand that there are reasonably good ones and those which are not so good. These distinctions are not available from LIMRA. Although wholesale distributors routinely help advisors make these very important distinctions.

• Never give away or sell a future benefit (or source of potential litigation) without reading the rider specimen language.
• Begin with a search to make sure benefits are not restricted by the requirement of a permanent disability.
• In the case of whole life base policies, look carefully at the premium and what may already be included and not appear as an extra charge.
• Many have been remodeled and updated (if filed through the IIRC) to use HIPAA look-alike claim definitions. The proverbial duck theory does prevail. These CI riders are very hard to tell apart from long term care.
• Can you tell your client exactly what they will be paid when and if they need money for care? If you cannot, you don’t want those deficiencies cleared up for you by a plaintiff’s attorney in 15 or 20 years.

Two thoughts:

1. It is so tempting to be able to say: “If you don’t use it, you didn’t pay for it.” Don’t do that—it is not true!
2. If you didn’t collect a premium you didn’t sell anything. If it was an accommodation to political correctness, an afterthought, or blatant window dressing, therefore it had little meaning and no real value to you or the customer.

Please leave these in your better than nothing bottom drawer.

I cannot resist the ultimate rhetorical question. If there is a worthwhile zero premium option, why not mandate its presence on all life sales? Problem solved, right?

Other than that I have no opinion on the subject.

Several prominent scientists recently shared the 2020 Nobel Prize for Physics. They were rewarded for helping to understand the exotic and mysterious phenomena of Black Holes.

• “The general theory of relativity leads to the formation of black holes.”
• “That an invisible and extremely heavy object governs the orbits of stars at the center of the galaxy.”

Their research has helped to reveal the darkest secrets of the universe. A black hole creates a gravitational pull that will not even allow light to emerge. The frequent readers of this column already know where this is heading. My partner and I have had numerous reflective conversations concerning our occasional combat fatigue with trying to illuminate the reality of the long term care “insurance” conundrum. Maybe it’s simply our own version of PTSD from the continuing battle to protect as many as possible from the potential financial implosion caused by an extended need for care.

It seems that light cannot escape the gravity of consumer resistance. It sometimes seems no matter how we approach the sale there is lurking in the background powerful calcified negative energy denial. The problem of course is that the war must go on. The reasons for the emotional and fiscal conflagration have not been mitigated. A satisfactory insurance solution that can create sufficient critical mass to make a real difference is still somewhat illusory. Whatever momentum we may have had 15 years ago has been decimated by rate increases and carrier exits. Exactly what happens before matter falls forever back into a black hole in our own Milky Way galaxy is shrouded by a cloud of star dust we have simply not been able to penetrate. In other words, we know what happens and does not happen in terms of a cosmically permanent result. We do not know why.

We keep trying to peer through that cloud to better understand. We try what could best be construed as a process of elimination with perceived consumer awareness and preference. It must be about price. Well, not exactly. It must be about benefits. Well, not exactly. It must be about perceived value. Well, not really. It must be about consumer awareness of the risk. Yes to awareness, no to buying action. We have simply been unable to uncover and free the light of a solution from the gravity of the problem.

The uncertainty of COVID-19 should have lit a beacon in a darkened night sky. Mortality is higher than expected over all; the number I have seen is 20 percent above projected. There is no mystery as to the source nor is there any confusion as to where the virus has hit the hardest. We have witnessed a new and ominous definition of co-morbidity and mortality not present in any actuarial product design. Time to take a deep breath as well concerning the long term effects of today’s decisions. The overall impact on future product design and satisfactory sales results is a giant unknown. While our physical health remains governed by adequate safety protocols, we should recognize the potential future concerns regarding mental health as well. In a recent NAIC article the well known underwriter Hank George suggested the pricing residue of the pandemic could lead to “an unprecedented, self-imposed underwriting apocalypse.” As you can already see frequently in the press there is considerable debate on what the pre-existing condition status will be for COVID survivors.

The pandemic has changed us permanently. The economy will hopefully continue to bounce back. Our approach to the sale, the companies’ approaches to the risk, and the consumer’s willingness to take action, may return to some version of so-called normal. But it will not be the same. Not only product but sales themselves will operate on a hybrid basis—part virtual, part personal. Zoom is here to stay but, when allowed, so is a personal close with a firm handshake or a small hug. Let’s hope that the lessons exposed by the virus can also finally release some light on more Americans willing to take actions now to protect their futures.

The Crusade to avoid the now painfully obvious shortcomings of institutional care and the capricious nature of mortality must now take on a new sense of urgency. This is protection which cannot be marginalized any longer.

Other than that I have no opinion on the subject.

Alright, I admit I’m confused—but dear friends I am not alone. The only significant sign of life in life insurance sales are those products that lay claim to some level of contingent long term care planning. We certainly have a plethora (I love the way that word rolls off your tongue) of product options to accomplish a reduction in long term care risk. The problem is we have made a mess of trying to differentiate between the product choices.

The current inventory of named categories may unfortunately represent nothing more than hitting the synonym button on your computer. Let’s begin by reviewing the plain vanilla definitions of the most prevalent choices:

• Combination: “A merging of different parts—where the individual elements are individually distinct.”
• Hybrid: “A thing made combining two elements.”
• Linked: “To make, form or suggest a connection.”

What should strike you is that all the visible market options of life insurance product distinctions with 7702B or 101g ADBRs and/or EOBRs fit all the definitions. Meaning whatever preconceived notions we bring to attempting to understand the various product choices just adds to the cognitive confusion.

Nomenclature then becomes a process, defined as “the devising or choosing of names,” that becomes a “system of names in a particular field.” As usual this potential for mental disarray is substantially compounded by the 80+ companies and myriad distribution marketing sources each trying to distinguish consumer product options based on need and motivation to buy. So now let’s try to glean what we can from the literature.

• Combination—appears to be the most inclusive named category creating the largest product tent from a cornucopia of “living benefits” to the weakest chronic illness rider definition. In truth any historical additional options added to a base life plan has created a combination product.
• Hybrid—seems to have the clearest definition as any describing a life plan plus a long term care 7702B health rider. This would then include life plus an ADBR 7702B long term care rider and any asset-based products with a separate extension of benefits LTCI rider. Hybrids would not include life with chronic illness ADBRs.
• Linked benefit products—again creates an all encompassing product option “catch all” with two specific subcategories: 1) Asset-based with EOBRs; and, 2) Life plus a long term care or chronic illness rider. This would then break down into three SubPhyla to include life plus LTCI and life with chronic illness, where you pay for the additional benefit cost which then creates a clear definition of benefits paid at the time of claim, and life plus chronic illness ADBR sold with no current premium utilizing the “rear end” load with the lien or discount method. Technically you could have an LTCI ADBR with no up-front premium as well. And it too would then be considered all the above as a linked, or hybrid or combo product that cost you nothing unless you actually tried to use it.

Are you adequately confused yet? Welcome to the crowd. If we have trouble talking in terms which represent common definitional ground, how many brain cells are we scrambling in our customers? Please explain how we direct traffic in a particular product direction if we are lost before we begin?

Best advice is to follow the money to keep things straight in your head.

There are basically four long term care sales planning choices. And to be perfectly clear yet again, all of them should be on tap when you begin a sales conversation.

1. Traditional stand-alone TQ individual LTCI.
2. Life with a chronic illness or LTCI ADBR that has no upfront premium cost. You pay one way or the other only at the time of claim. Forgive my impudence here but I’m not sure you can call this a sale when you gave it away.
3. Life with a chronic illness or LTCI ADBR where the customer pays for the benefit as they go—either included in the premium or as a rider option. By paying upfront they most clearly define the actual benefits that will be paid when needed.
4. Life with an extension of benefits third pool of LTCI funding leveraging risk dollars for more affluent consumers.

And I have not forgotten annuity combos or enhanced payout options. I am also not ignoring short term LTCI health products which are also gaining popularity. They are just alternate cans of worms reserved for another discussion.

Try to keep it as simple as you can. Initial long term care planning conversation will continue to begin with insurability issues and progress rapidly to an evaluation of individual needs coupled with a combination of the willingness to link appropriate action now with the ability to pay for a hybrid solution.

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