I’m not sure where to begin this subject. I know it has something to do with bad apples and rotten barrels. I know it seems to remain the most serious and perpetually frustrating part of my day. I know I simply have to locate and remove the bad apples which continue to threaten the normal harmony and peaceful flow of apple-cations through our offices. Unfortunately, the bad apples remain elusive and, for the most part, very hard to properly identify so one can take appropriate remedial action.
We seem to have entered a new and precarious era of placement ratios distress. I recognize that we can now count the available storage barrels for LTCI apples on fingers alone, no toes. And I know growing claims and the persistent noise of onerous rate actions haunt the corners of our minds. Underwriting is tough and becoming rigid and impenetrable.
I understand that with LTCI we cannot buy claims and that the coin of the realm to purchase protection is the client’s good health. As we enter each conversation about the importance and common sense of LTCI ownership, we must be extremely wary. I have heard it whispered that all LTCI sales are riddled with adverse selection worms. That every potential apple—and particularly those who have come looking for you—does so because they know something you do not about their health, finances or family history. Except among the vanishing cadre of LTCI specialists, the average number of LTCI sales per agent is very small and, frankly, most were taken away from the broker, not solicited as new sales. In other words, the client who has asked about buying a policy is probably the absolute worst place to begin this process.
There is nothing easy or efficient about getting these policies in place.
The relationship between those submitted and those actually placed has always been tenuous by its very nature. For a very long time a 70 percent placement rate was adequate. Those who didn’t make the cut were usually composed of about 15 or 20 percent declines, 7 or 8 percent not taken, and 7 or 8 percent withdrawn. If these basic tolerances were exceeded, we knew exactly where to look for brown spots on our apples. Either that apple was already bruised and in bad health with a predisposition to spoil, or someone did not adequately complete all the paperwork, certifications and signatures required for safe apple storage. Then, of course, there are always those who have changed their minds about purchase after the process has begun. As we know, three-fourths of apple submissions come in pairs—committed couples and cohabiters proud of their relationship to each other and unwilling to accept a process that does not guarantee that both will be accepted. In other words, when one applicant is not healthy enough to complete the process the other all too frequently adopts the brilliant strategy that therefore no one should have the privilege of safe storage.
To put it another way, it has always pressed down to be either poor health, poor paperwork or poor choices! The companies involved in this horticultural business have recently modified their tolerances, with 60 percent placement versus submissions as the new minimum standard. Frankly, even with the lowered expectations of success, many of us are still struggling. There may be some clues as to the source of the problem. In no particular order of significance:
• Most applications come from agencies in which LTCI is a corollary line of business. Life and annuity applications are handled differently, with incomplete applications and the possibility of negotiating the underwriting outcome as a routine business model. With LTCI you cannot throw applesauce against the wall. It will not stick.
• It is mandatory to reduce expectations. Preferred, unblemished, prize-winning apples are very rare. Please stop quoting like they can be found easily on the ground.
• Field underwriting is critical. We do not even encourage running proposals until the broker has at least prescreened the risk. What good is accomplished in the sales process if you don’t even know yet if apples are available? An abbreviated medical questionnaire is actually a required component of our proposal request form. We need height and weight, tobacco use, prescription medications, and any major health issues or pending surgeries at the very least. We make prescreen calls to underwriting helplines when there is any doubt at all about outcome—which is almost every time.
• Medical questions have even been removed from some applications in anticipation of a more thorough paramed exam. If the application does not ask the questions, you must. A bad paramed is not a happy outcome for anyone.
• Prepare prospects for exams and phone interviews. Warn them that the underwriting procedure is thorough and somewhat intrusive. Problems past and potentially future will not remain hidden.
There are also some nebulous underlying concerns that may also be influencing profitable production. Somewhere between 35 and 40 percent of those who wish to buy will simply not be able to complete the transaction. Massive anticipated rejections may be creating their own self-fulfilling prophecy. Market distractions in the acquisition of health insurance and a seemingly perpetual flat economy also have to represent a contributing factor to sales growth. The company exodus from the market is also not building faith in our line of business. Excessive underwriting based on perceived potential claims paranoia is also obviously not helpful.
However, the coolest thing about apples is that if you inspect them carefully, certify their soundness, submit complete paperwork and store properly, they have an extremely long shelf life.
Other than that I have no opinion on the subject.
