Ronald R. Hagelman

“Everybody wanna know the reason…without even askin’ why.”
—Albert King, Everybody Wants To Go To Heaven, Lovejoy, (1971)

It should be more than a hindsight rationalization. It must be more than a justification of expense. Sometimes it just seems like a child has wandered into the room and picked up a telescope and peered into a new reality from the wrong end. Consider this column a formal complaint. What we cannot escape is a market where the number of new participants each year has remained relatively constant. Frankly, for more than a dozen years it has not been merely static—it is calcified and stagnant. We continue to fumble with after-the-purchase analysis. In the last six years we have gone from 90 percent individual health insurance to 90 percent individual life insurance driving the sales bus. If we are ever going to get this sale off of dead center we must do a better job of asking the right questions about what has happened and what needs to be reformed.

Obviously our industry has engaged in trying to determine why someone might actually buy. The companies do engage focus groups to try to analyze potential buying behavior. Traditionally asking some version of, “What type of product or benefit would convince you to buy?” A cursory attempt is also made to determine what primary factors might influence a prospective buying decision. And the most obvious predisposition/glass ceiling: Cost is universally “sized” up. Price does matter and understanding the relationship between a known risk, a proposed value proposition and a commitment to buy lies at the heart of any possibility of ever getting sales to provide more protection to more prospective consumers.

What we do most times, however, is conduct a sales post mortem after the fact. This is always seriously contaminated by cognitive dissonance. Frankly, asking someone why they bought, or for that matter did not buy, is frequently an exercise in a self- fulfilling prophecy. For example, consumer research begins with the obvious why: “Did you make a wise financial decision?” Who among us would not come to attention and proudly proclaim their personal brilliance in that regard? Unfortunately, formal analysis then usually begins to justify its own predispositions. We had created a product to respond to perceived market need and it was purchased. Certainly it must have been because of the beauty and wisdom of its structure and intent. Let’s just consider our historical review of the obvious. “What was the number one reason (by survey) that someone bought?”

Beginning over 15 years ago the number one reason gleaned from consumer survey analysis was financial wisdom taking specific and definitive action to protect assets and legacies. Slowly but surely the truth just under the surface has begun the bleed-through. The sale most frequently comes from a personal and experiential confrontation with the real burden of caregiving. Forgive me for suggesting it could never have been revealed from any source other than those who actually make the sales. It is specifically the fear and recognition that the unpleasantness that they have witnessed in their own extended family could happen to them.

Could we possibly be asking the wrong folks about what happened or, more importantly, what needs to happen? We know that the largest billboard on the busiest highway will not sell long term care risk abrogation. This remains the toughest consumer sale to make and it continues to require personal effort and expertise. We have seen a very dramatic shift in the location of this sale. What we have not seen is any analysis of how, by whom, and under what circumstances these new sales are taking place. The so called LTCI specialist is on the endangered species list. Those financial advisors only very recently in opposition to traditional sales now seem to be leading the sales parade. Frankly troops, we need to know what the hell is really happening out there. How is the conversation now begun? How are potential product directions determined? Where is the most significant sales emphasis being placed? Is it a primary, contingent, incidental or supplemental sale? Not only is the product landscape changing, the vendor response is in major upheaval. Nursing homes and assisted living facilities continue to have falling occupancy. Not only is the public boarding up their front doors to remain at home, it may end up being customized versions of ALEXA and SIRI that become primary caregivers in that home. Even suggesting that technology would be our greatest weapon in this struggle would not have been on any one’s radar in the recent past. Home care has the only real opportunity to hold down cost and coincidentally it is what everyone would prefer. How is this new reality embedded into the sales transaction? In other words, please do not tell me once again how to count my chickens after they have hatched—particularly when you can’t even tell me the location of the hatchery!

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

Human nature continues to get in our way. But of course this perpetual uphill battle defines our chosen profession. What I would like to suggest is that this remains a double-edged sword. Perhaps the greatest flaw in our sales history is the propensity to sell what arrived in our briefcase at the moment of a sales presentation. Convenience and expediency continues to threaten our basic fiduciary responsibilities.

Let’s begin with the largest mystery that clouds current sales results. Combo life sales will represent 90 percent of extended care risk solutions in 2019. But what was the true nature of that sale? Was it simply a traditional life sale with long term care/chronic illness furnished as an “add on,” or was it offered as a direct alternative to a request for help with that specific risk abatement? Was the sales conversation a comprehensive one in which all alternatives were described and offered?

My concern is simply that we cannot clearly identify from existing research or sales trends how and why a sale took place. When we stand confronted by a clear future risk that the consumer probably originated as an insurance conversation—what happened next ? We assume at least some level of basic financial analysis and planning takes place to justify insurance need and premium commitment suitability. Now how does that translate into a specific product offer?

Here’s what we do know from Broker World surveys and LIMRA Life Combo Review:

• The Upper Middle Class is virtually the only recipient of our sales efforts. Stand alone sales correlate directly to assets and income.
• The affluent tend to buy asset-based products with “lazy money.”
• Most consumers do not plan to consider long term care planning until at least age 55.
• Conversely, consumers under 55 are more interested in combo life.
• Producer preference is also clear. Long term care specialists prefer stand-alone as the best premium leverage. Financial advisors favor combo life and asset-based advisors favor single premium, while life insurance sales professionals prefer chronic illness riders as a sales enhancement.

I have participated in a number of “live” agent training sessions with a focus on all methods of confronting this risk and the largest contingent of those in attendance are those who “used to sell LTCI.“ What now lies at the heart of new sales? What, if any, are our responsibilities to describe alternatives and how each one might address a consumers specific risk abatement? I can visualize in my dreams a producer coming to that proverbial fork in the road with multiple choices and trying to evaluate which choice will lead them home safely and expeditiously.

I understand that the logical choice must be the one with which they have the greatest knowledge and familiarity. However, I would be remiss if I did not point out the obvious—that this prejudiced decision process may not have occurred in any one’s best interest.

I am also not convinced that intentionally restricting sales to those least vulnerable to the financial ravages of a need for extended custodial care serves our universal desire to reduce this potential risk. Confining our sales efforts almost exclusively to the most affluent is, first of all, a diminishing resource and, more important, does not in any way open up future sales. Furthermore, if we do not add an aggressive supplemental sales approach to the risk, we cannot drive this sale deeper down into the middle class. In other words, our goal must be to do all we can to help maintain private pay status for all the consumers we engage. Adding a smaller cash flow to existing retirement income instead of defining every sale as a catastrophic risk that must be covered by a large insurance commitment must become our new mantra.

The bottom line is that comfortable, convenient and familiar should be declared public enemies. A demand that sufficient planning must precede any advice on product direction, complemented by an open mind containing the professional flexibility required to justify those decisions. All possible choices must be hard wired into our behavior if this is ever to become anything more than a boutique sale.

Other than that I have no opinion on the subject.

A very short 16 years ago the promise of stand alone LTCI was shining brightly. We had directly addressed a pressing need with the help of a clear cut legislative mandate. Over a hundred companies had flocked to our cause. Sales growth had been steady since HIPAA. In marketing staff meetings across America we congratulated each other on our marketing wisdom and optimistically predicted continuing successful growth. And then quite frankly our chickens began to come home to roost. There was simply much we knew and conveniently misplaced in our minds:

• This was health insurance after all and would be subject to claims experience. I remember vividly standing at the first ILTCI Conference at that initial cocktail gathering hearing many wish we had more claims experience. Careful what you wish for.
• We knew sales drift to more affluent customers as time goes by. We knew big premiums and big commissions were a well known and potentially dangerous siren song, but the music was so sweet we could not resist.
• We knew this was a contingent liability but the cost for catastrophic coverage was so competitive when measured against the potential risk, why not just sell life time benefits with five percent compound inflation protection? And so we overloaded the boat.

In fairness, there was also much we could not possibly have seen:

• The persistent failure of Medicaid to provide quality care.
• The rise of expensive private pay facility care vendors.
• The historically unique love of these new policies once purchased.
• Market pressure to enhance and perhaps over sell non-insurance benefits.
• The reality that adverse selection lies at the heart of this sale. Those most anxious to buy see the genetic handwriting on the wall.

If this is beginning to sound like a post mortem, it cannot be helped. Beginning 15 years ago the earth beneath our feet began to shift. As premiums rose, as a reflection of the items outlined above, sales have fallen year after year. Last year the LIMRA numbers for individual LTCI sales were dismal and disheartening. No amount of optimism can reanimate the reality of the numbers. This year fewer consumers will buy stand-alone LTCI than fill a college football stadium on any one Saturday. To put it in perspective, that is how many lives were sold by the top 23 companies in the first quarter of 2009—just ten years ago. Just a couple of fast observations before we move on to what is selling. The strength of our best years came from corporate premium deductibility and advanced modal premiums, and they are still standing there with open arms welcoming potential customers., Much of the stability and promise for growth came from worksite sales now desperately in need of a rebirth and innovative strategies for combo sales in this arena.

Now for the good news: This year we are approaching half a million buyers of some form of combo life policy. There will be plenty of future grist for the mill in this column. Perhaps the number that jumps out of the 2018 LIMRA numbers is that recurring premium policies grew to 93 percent of all sales in 2018. We are clearly seeing a desire on the part of the mass affluent to take advantage of this extended care risk approach. Although combo UL represented two thirds of all combo sales, it was whole life that showed the greatest statistical growth. Guarantees do matter. Long term care IRC 7702B and chronic illness IRC 101g were equal at just above 40 percent each with asset based extension of benefits making up the difference in premium although representing the largest number of new policy holders. Frankly we should like everything about this solid and hopeful growth:

• Premiums are stabilized and predictable.
• Structurally, as a rider, the risk occupies its correct location as a contingent “possibility” not a catastrophic certainty.
• Net cost for the risk has been dramatically reduced.
• There is no reason this should not be a part of every sales conversation. Fiduciary responsibilities are direct, visible and certain. Omitting this conversation becomes increasingly perilous.

It is here that we need a quiet and reflective prayer:

“May we be blessed with the wisdom to not relive the past. May our mission to guarantee future private pay status be much clearer and our potential customer base be much greater. May the companies with the courage, stamina and patience necessary to develop not just new product but a new and vibrant middle class market please step forward into the light!”

Amen.

Impossible not to envision a classic movie version of the damsel in distress tied to train tracks with the sure and certain speeding train barreling down the tracks, steam belching from the smokestack and whistle blaring in a futile effort to prevent an inevitable catastrophe. The problem is, here we are 20 years since HIPPA and we still cannot get a clear vision of what that potential hero hopefully coming to our rescue looks like or if he or she even exists. The potential ugliness of the risk grows larger and continues to resist any amelioration designed by mere mortals.

Forgive the painfully obvious—insurance is about intervention. It is about intentionally restructuring the potential outcome of highly likely adverse future possibilities. It’s not terribly encouraging that:

• The percentage of those individuals with insurance is falling, looking more like less than seven percent.
• It appears we are simply churning product options from over a 100 stand-alone LTCI options fifteen years ago and now approaching a 100 combo options of one flavor or another. Clearly as one choice lost ground the other rose from the ashes. The problem remains that we have not moved the needle. Even though the battle plan may have shifted, unfortunately the number of Americans trusting insurance and buying some form of protection remains ominously flat.
• Our aging population continues to rise like a mushroom cloud with the U.S. Census reminding us that the 65+ population will grow by 70 percent over the next 20 years—and half of them will need formal care.
• Compounding the impending train wreck is the vanishing inventory of available caregivers. The cost is simply too high. Personal income of caregivers is directly impacted about one third of the time and almost two thirds had to invade savings or retirement income.
• The overall financial health of our seniors is also seriously anemic with limited savings and rising senior bankruptcies.
• Public support programs are also sputtering out with Medicare Part A scheduled to run out of money in 2026.
• Stand-alone LTCI sales fell off a cliff in 2004 and have been rolling down hill ever since. Which creates a corollary outcome, meaning available potential distribution to solve the problem began to vanish simultaneously. The most frequent agent I meet on the road is the one who “used to sell LTCI.”
• Individual LTCI health sales are 80 percent-plus concentrated at two companies—one brokerage and one career. Monopoly by default may not be in anyone’s best interest.

Let’s save speculation about where we go from here for another column, focusing on what’s at hand: The “Rise of the Combo.” Here it is impossible not to envision the most recent re-incarnation of Godzilla rising from the radioactive ocean floor, but not being sure whether the monster is coming to town to do good or evil. This representation of our fears is hell bent on something. Unfortunately, we all suspect that it may be only the immediate gratification accomplished by demolishing existing structure. Meaning, simply, we have to stop reinforcing the corporate zero sum marketing game perpetually reflected in LIMRA production numbers. There must be a way to break out of the futility of reliving past performance. Walking away from the status quo is revolutionary by design. For example:

• If men claim earlier and shorter than women, why don’t premiums more substantially reflect this obvious truth?
• If 70 percent of the risk is less than $50,000 and only 12 percent exceed $250,000, why aren’t products built to conform with the reality of the risk structure?
• If the lowest cost for any risk floats eventually to the surface, why haven’t pay as you go 101(g) riders costing only about three percent of premium flown off the shelf?

These and many more mysteries continue to plague our thinking. We not only need to think outside the box, we desperately need to recycle the box and imbue it with the structural stamina and courage of long term commitment necessary to transform a private insurance alternative.

Other than that I have no opinion on the subject.

As a product consultant since 1988, I have been involved in the revision or creation of over 50 new insurance products with 16 insurance companies. I mention this not to boast (as I will never reveal the ratio of past successes to failures ) but only to legitimize my right to ask the most important question present in this whole process: “How many times can you tell the field that your newly polished and filed policy form is meaningfully and measurably “new and improved”? And then expect them to be gullible enough to believe in the frothy hyperbole that comes with product introductions, when in truth it may often be just more of the same. We know that when you stop and think about the philosophical core of wholesale brokerage it is centered on eternal hope and perpetual policy introductions. We are most often the originating source of benefit creativity and product design innovation. We have always had greater purpose than to just take expedited orders for products hopefully sold in volume on historically thin margins. Our ability to continually adapt and reform our product approach has consistently benefited the American consumer. The net result over time has been more competitive product cost and more form fitting benefit to risk product emphasis. In my humble opinion nowhere has this been more self-evident than in our perpetual, ongoing quest to solve the chronic illness conundrum.

I remain a proud card-carrying member of that stalwart cadre of hardheaded extended care specialists. A plain and simple truth pushes us forward each day. We know the risk is bigger than publicly perceived. We know the potential for catastrophe is measured in more than the decimation of financial reserves. We know that statistically inevitable predispositions in terms of available caregiving resources will sink many more boats than our customers recognize. We also know that the only glue that can possibly save all our posteriors is more insurance.

• As stated in earlier columns, my consulting partner and I have been asking “Why can’t we get this right?” for too many years. Perhaps it’s the more basic questions that need our attention first:
• What chronic illness problem are we solving for?
• How big is the problem?
• How much protection is actually enough and for whom?
• If it’s a contingent risk, why do we continue to price as if it were a catastrophic inevitability?
• Why have we never focused on the actual net cost of the risk itself?
• Why has the supplemental risk approach not gained sufficient market traction? Why do our sales efforts highlight catastrophic risk prevention almost exclusively?
• If the Partnership juggernaut was a failure, why do we continue to believe that additional tax incentives are the solution panacea?

We must free our thinking, truthfully a tall order.

This must begin with a willingness to embrace new strategies for approaching the risk for a greater number of American consumers. We desperately need new marketing ideas, new strategic sales approaches and much better defined and achievable goals. The truth is that the greatest obstacle to moving forward is the inertia present in our own minds.

My partner and I are currently helping to introduce a combo life product. The first question from our distribution friends every time is: “What product is it like?” Each time I hear that question I think my head will explode. God forbid we should venture outside our comfort zone. What if by some bizarre twist of fate it really is new and improved? Who among you would open the door and let the light shine in?

Other than that I have no opinion on the subject.

Another loose cannon in the current lexicon of confusing popular buzzwords. Living benefits began with the first cash value policy where the consumer could access their own “investment” component while still “living.” It’s history is also littered with the bodies of any benefit that took place before the death of the primary insured from accident benefits to children’s term.

Where the confusion begins to set in is the conceptual relationship with terminal illness allowances. Just for the record: The idea of present valuing an imminent death has been around from the beginning; conversations about immediate need where the inevitable was crystal clear were entertained and facilitated at home offices. Now comes the chicken and the egg conundrum as to where the fuel for viatical vs terminal illness allowances interact. Both companies and private resources understood that a short duration between a terminal health condition and the sure and certain knowledge that remaining premiums would be paid, and a death benefit would therefore also be paid, allowed for private accommodations. All that is being suggested is that the idea of funds remaining in the building may have helped fuel this dramatic expansion of accelerated death benefits aka living benefits. Although terminal illness payments may affect Medicaid and SSI benefits, they are generally viewed as a tax-free death benefit.

Terminal Illness riders are generally available on life policies most often as a “free” benefit. They also usually include a limitation as to the percentage of death benefit that is available. (Example: 75 percent.) It is important to stop here and emphasize the importance of not confusing Terminal Illness with Critical Illness. Terminal is just that requiring certification of no recovery and most often less than a 12 month life expectancy. A critical illness suggests the possibility of recovery. HIPAA dramatically expanded the conditions that could be viewed as an accelerated death benefit providing early tax-free death payments to include: Critical illness, disability income illness, nursing home illness and chronic illness. This expansion of tax-free benefits now fuels the current focus on “Living Benefits.” Initially this plethora of present value calculations followed a familiar and time tested formula: Benefit payments would be calculated by time and loss of money based on an early death not contemplated in the original mortality assumptions at the time of purchase, and, frequently, they were medically underwritten to estimate the severity of the condition and anticipated longevity.

I believe it is here that our current problems with chronic illness riders began. While this was a logical and practical approach, and the only one available at the time, that period of expediency has long passed. The long term care provisions of the Pension Protection Act that went into effect January 1, 2010, have fueled the rising combo market. In addition, recent liberalized provisions in the IIRC enhancing allowable critical illness claim trigger definitions have leveled the benefit playing field between an IRC Section 101g chronic illness life rider and a IRC Section 7702B health rider. Meaning simply about 24 months ago it became more advantageous to purchase an extended care benefit life rider on a pay as you go basis. This was of course already being done with 7702B riders after the PPA revisions on how those internal policy premium deductions for health insurance did not trigger a taxable event.

Now let’s cut to the reason for all this historical rambling. There are 70 plus companies with some form of chronic illness rider offered on their life policies and about 80 percent of those (before I go on, a reminder that this is an opinion column) simply do it wrong. At best they have chosen to not upgrade or modernize their offerings. The so-called discount method vividly outlined above is antiquated and potentially harmful to your E&O premiums. What needs to be clearly understood is that we can understand how and why they originally got there. We do not have to understand why they don’t fix it now. The often-repeated proclamation that there is “no current charge” for the rider is because you did not buy anything you can accurately measure and count on at the time of greatest need. Therefore I can only conclude the obvious—they do not like the risk. They do not understand the risk. They do not want to take any risk. I can’t make this any plainer—it is just too easy and inexpensive to fix it and do it right. If you cannot identify the actual cost or accurately predict the ultimate benefit, I would think that this is a transaction you might wish to step away from until you can. In the interim look for the 20 percent of companies who have a pay-as-you-go structure. Meaning simply that at all points in time you know exactly what the benefit costs and how much help it will deliver when required. Somehow that seems a much more practical and less dangerous approach to extended care planning.

Other than that I have no opinion on the subject.

My partner and I have certainly earned the title of Long Term Care Insurance “Road Warrior.” We are beginning yet another educational crusade this Summer. For more than 20 years we have walked to the front of the room to rally the troops. Live training always works best and our passion for helping to solve the Care Conundrum whips us once again to the pulpit. Over the next six months we will set up our revival tent in most major metropolitan areas. Our detractors, of which there are a few, will simply suggest that the circus is coming to town. We will not be deterred.

It has been suggested that I have been giving the same speech, or for that matter writing the same column, all these years. I cannot speak for my partner, but I will freely and openly admit that is absolutely correct. I have now many hundreds of times asked only one consistent and repetitive question: “Why in the hell can’t we get this right?”

We like to read the room before we begin our pontifications by asking for a show of hands:

• How many have ever sold a LTCI stand-alone health policy?
• How many have sold a combo policy of any kind?
• How many used to sell but gave it up?
• How many own a policy of their own?
• How many upset a client with a policy decline?
• How many have had a rate increase rise up and bite them in the posterior?

If you think I am going somewhere with this—I’m not. Frankly the above information is entertaining but not that revealing. The one question that matters is, have you made long term care, chronic illness, long term services and supports, or extended care planning a fixture in your practice? How many can honestly say they were proactive and not reactive? How many can look in the mirror and tell themselves that they sold more protection of this nature than the clients took away from them? By the simple measure of who asked whom we strike at the real core of the problem!

I can’t imagine that anyone who reads this column doesn’t hold some basic understanding in their minds that we keep ordering from a private care menu without honest published prices. The bill will come due. Your clients will pay. Can you document in all your client files that you offered to help by using leveraged insurance dollars to intervene?

Long term care remains the bastard step-child of an industry that remains in denial. Long term care specialists are a vanishing breed. We have been making excuses for adequate market penetration for over 20 years:

• It’s the product. Wrong, I can’t imagine what perceived product deficiency we haven’t directly addressed. Product options are for the most part simpler and more transparent. There are options now with net cost against a core life premium running less than five percent of cost and combo benefit with annuities less than one percent.
• Family caregiving is easily addressed by using a chronic illness rider paying indemnity dollars.
• Rate stabilization has drastically slowed the rise of new LTCI premiums.
• Living benefits—the good kind (pay as you go), and the bad kind (benefit discount)—are now available at over 70 companies.
• Return of premium options or reasonable future CV surrenders are abundant.
• Short term sales are steady, and even with only 360 days of benefits we know we are covering half the known risk.
• I can’t think of anyone who does not understand the marginal nature of the problem or the potential for a catastrophic financial problem.

The point is these are all just symptoms for which we keep applying bandages. Maybe if we just admitted what we all know we could move this forward. Most insurance professionals do not like this risk. Far too often the client must ask us for help. Far too often the agent is even more reluctant to discuss the reality of the coming care unpleasantness than the potential insured. We thought State sponsored Partnership plans would turn the tide. We thought mandatory training would force better behavior. We probably knew good behavior does not come from the outside. The weight of trillions of dollars needed to care for the Boomers will arrive and it will be paid regardless. It must come from taxes, personal assets or insurance. The consequences of avoiding the inevitable and the responsibility of ignoring and squandering the opportunity to be helpful should begin to weigh heavily on far too many.

Other than that I have no opinion on the subject.

“A rose by any other name would smell as sweet.”
—William Shakespeare, Romeo and Juliet.

We’ve just spent 30 years helping consumers understand that being totally unprepared for long term care risk is a sure-fire strategy for financial catastrophe. We have spent the same period determining the true nature of the risk and where best to apply insurance protection. We have acquired a better understanding of how much insurance is enough. We have developed multiple product choices and are much better able to customize insurance solutions. But recently I have witnessed a prevalent speech impediment bordering on an institutional stutter in terms of what we call the insurance options we sell. Is it long term care, long term services and supports, chronic illness benefits or extended care?

I was recently admonished by the strident voices from “compliance” for at least the ten thousandth time that you cannot call a chronic illness ADBR long term care insurance.

It says so right on the front of the policy! As the standard and overly familiar lecture began, my mind was screaming, “This confusion must stop!” So I politely asked, “Do you know why?” Herein lies the problem: We know why, they do not. Make sure your client understands a rose is a rose is a rose.

If that rider is built with the correct language currently available from the IIPRC it is insurance for long term care risk abatement. The structural differences are very small and do not defeat the purpose and intent of the product. The monies may be coming from a present value of the death benefit, but the claim will be paid exactly the same. So please do not forget that you simply cannot call it by its most descriptive term even though that is exactly what it is. Why? A little LTCI history 101 is in order. HIPAA defined TQ LTCI as health insurance under IRC Section 7702B. This is also exactly why stand-alone LTCI corporate premium deductibility will continue to elevate this sales advantage to the head of the sales prospect line. A chronic illness ADBR on the other hand is simply a HIPAA expansion of terminal illness provisions under IRC Section 101g. So again, to jog your memory, HIPAA gave us two paths to tax-free benefit payments: TQ LTCI and more early present value death benefits. Combo policies did not come to life however until the long term care provisions of the PPA went into effect January 2010, where the cost of the rider could be deducted internally without creating a taxable event. And in April 2016, alternate adopter language was added to the IIPRC which allows the identical claim triggers as LTCI.

After you exclude the “discount” method of claim payment, which I have been trying to accomplish in this column for many months, you are left with a handful of honest and transparent “pay as you go” riders. It makes no difference if they are 7702B or 101g riders, you have paid for a known benefit you will receive when you need care. It should be plain to all that you cannot call life insurance health insurance! But if the claim triggers are the same, and the claim is administered and paid on the same terms (reimbursement or indemnity), then dear friends they are truly both roses and both smell sweet to me. And just in case you don’t relate to flowers or Shakespeare; “Sticks and stones can break my bones but words can never hurt me!”

Other than that I have no opinion on the subject.

Fairly certain no one will argue with the notion that limitations or restrictions that apply to specific policy benefits can be considered “flaws.” Any benefit that is not complete as presented must be inadequate by definition and therefore “flawed.” What “is” is of course crucial, but what “ain’t” is critical to our professional survival.

A vibrant combo life and annuity market has bubbled to the surface. As predicted repeatedly in this column over the last 10 years. (Sorry, I couldn’t stop myself.) You simply do not want to be the company that does not have a critical illness/long term care combo option. Not having one paints a giant target on the back of any existing coverage. Home office 1035 personnel are vibrating in anticipation. Combo policies have been around forever; truthfully the two birds with one stone story never loses its luster. The corollary truth is equally important: Two risks require two costs. Nobody rides free.

This is specifically why the adherents of supposedly free, no up-front cost, rear-end load, “discount” method chronic illness benefits Fry My Toasties! The obvious bears repeating—there is no free lunch. The entire cost of carrying the additional risk will be deducted from future benefits owed and then some. I recognize it’s fun to let the words, “If you don’t use it—it cost nothing” spill from your lips. Unfortunately the corollary truth becomes if you do need it, you have no real idea what the hell “it” is. That unknown, unidentified and currently unavailable for viewing, is also often sheltered from the light of day by built-in obstacles to claiming in the first place. The most glaring example being a requirement that benefit payment requires a permanent disability. The NAIC has allowed a more HIPAA-friendly definition for several years. The cost to the policy is infinitesimal but the benefit to the buyer is critical. Some companies have gone back and revised their definitions, which should be applauded, and new product is more likely to include the newer language as well—which makes the benefit much more copasetic. But if it’s a “discount” method payment your actual benefit, although more liberally defined as the benefit amount, is still a mystery until you really need the money. I must wonder about the efficacy of carrying sufficient E&O in retirement to be prepared when the “surprise” gets sprung on the uninformed policy holder. Bear in mind that the benefit is unknown until your client comes face to face with the reality of the imbedded shortcomings you let flow under your due diligence bridge unmolested.

I can’t believe I have to say this again: Read the specimen contract and find the flaws! If you cannot guarantee benefits, and hopefully premiums, I must ask, “What were you thinking?”

Let’s approach this calmly and rationally. Your client has agreed to buy protection against the possibility of the need for expensive extended care. It seems fairly clear that you should at least explain what that does cost. If you didn’t pay for it, it seems reasonable that there might be questions as to the validity or quantity of ultimate claim payments. I further suspect nothing should bring you in close contact with nothing, or not much, at the time of claim. Paying a known cost for a known benefit does seem to be a much safer approach. Why not take a hard look at what that net cost actually represents. Please divide the premium into the rider cost. The results might surprise you and be very illuminating to your customers. Most long term care/chronic illness claims are manageable. Doesn’t it strike you that the cost to protect a risk of that magnitude should also be manageable from a cost standpoint?

Why can’t we do this right?

You are at a fork in the road. One direction is a well-lit, newly paved toll road. You know where you are going. You know how long it will take to get there and exactly what it will cost to arrive. The other road is overgrown, dark, with unseen potholes and a dubious end to your desired journey. Again, forgive me…I just can’t see a more obvious decision. A baby pig is in a gunny sack. It can be seen moving and heard squealing. The problem, of course, is that we already know it’s probably the runt of the litter, but it is unknown just how deficient is its size and growth potential. Out here in the country we would not ever buy a “pig in a poke” or frankly have anything kind to say about those who sell them.

Other than that I have no opinion on the subject.