Friday, March 29, 2024

2021 Milliman Long Term Care Insurance Survey

The 2021 Milliman Long Term Care Insurance Survey is the 23rd consecutive annual review of stand-alone long-term care insurance (LTCI) published by Broker World magazine. It analyzes the marketplace, reports sales distributions, and describes available products.

More discussion of worksite sales, including a comparison of worksite sales distributions vs. non-worksite sales distributions will be in Broker World magazine’s August issue.

Unless otherwise indicated, references are solely to U.S. stand-alone LTCI sales, excluding exercised future purchase options (FPOs) or other changes to existing coverage. “Stand-alone” refers to LTCI policies that do not include death benefits (other than returning premiums upon death or waiving a surviving spouse’s premiums) or annuity or disability income benefits. Where referenced, “combo” products provide LTCI combined with life insurance or annuity coverage. “Linked benefit” policies are combo policies which can allow more than the death benefit or annuity account value to be used as LTCI.

Highlights from this year’s survey

Participants
Eight carriers participated broadly in this survey. Four others provided sales information so we could report more accurate aggregate industry individual and multi-life sales.

We estimate our statistical distributions reflect about 75 percent of total industry policies sold (85 percent of premium) and about 15 percent of worksite policies sold (30 percent of premium). Total industry sales and total worksite sales (the denominators) include authors’ estimates of sales for three companies.

Our worksite statistical distributions can vary significantly from year-to-year because insurers focusing on particular worksite markets may be over- or under-represented. Our worksite statistical analysis is overly weighted toward executive carve-out programs. The carriers which provided 2020 statistical data had an average worksite annual premium of $4,218 whereas the insurers which did not provide statistical data had an average worksite premium of $1,634.

CalPERS, Northwestern and the six insurers displayed in the Product Exhibit provided broad statistical information. Auto-Owners, Country, LifeSecure, and Transamerica contributed total and worksite sales (new premium and lives insured) but did not provide other information. However, in a few places we were able to reflect some of their product designs in our statistical distributions. We estimate approximately $10 million of sales for those insurers which did not contribute their sales data.

Country Life, Genworth and CalPERS stopped selling stand-alone LTCI in 2020; however, Genworth has since resumed sales and CalPERS intends to resume sales. MassMutual and Transamerica discontinued selling stand-alone LTCI early in 2021 but Transamerica continued to accept new worksite applications until mid-year and may be experiencing last minute sales as a result.

Sales Summary

  • After having reported an increase in new premiums in 2019 (for the first time since 2012), twelve insurers reported $139,562,096* in 2020 annualized new premium sales (including exercised FPOs) and 41,440 new policies, 9.7 percent less premium and 11.9 percent fewer policies than the same insurers sold in 2019. However, some insurers with limited 2020 activity did not report 2020 sales to us. Including estimated sales for those insurers we peg total stand-alone LTCI industry sales at about $150 million*, which is nearly 13 percent less than the 2019 sales of $171,634,536 (restated upward by nearly $900,000 from our report last year). As noted in the Market Perspective section, sales of policies combining life insurance with LTCI or Chronic Illness benefits dropped eight percent in the first half of 2020 and corresponding premium dropped 19 percent. *Single premium sales are counted at ten percent for the annualized premium calculations herein.
  • Although we are not able to quantify the magnitude, the COVID-19 pandemic could have had a material impact on sales.
  • Three insurers sold more new premium than in 2019.
  • The pandemic may have had a greater impact on worksite sales. We estimate worksite new annualized LTCI premium dropped 15 percent in 2020 (18 percent fewer new sales).
  • With FPO elections included in new premium, Northwestern retained the number one spot in sales. Mutual of Omaha was a strong second and again had a large lead in annualized premium from new policies sold. Together, these two insurers combined for 60 percent of new premium including FPOs, compared to 59 percent last year.

The number of policies inforce increased each year through 2014 but has decreased each year since, decreasing 0.9 percent in 2020. However, inforce premium continued to increase (1.9 percent) despite fewer policies inforce and more policies in paid-up status. Inforce premium rises due to sales, price increases, and benefit increases (including FPOs), and reduces from lapses, reductions in coverage, deaths, and shifts to paid-up status for various reasons. A major carrier did not report inforce data, likely suppressing the percentage of inforce premium increase.

Collectively, the seven participants which reported claims saw claims increase only 1.6 percent in 2020, partly because two insurers reported a reduction in claims. The other five insurers experienced a 5.2 percent increase in claims in 2020. Overall, the stand-alone LTCI industry incurred $12.9 billion in claims in 2019 based on companies’ statutory annual filings, raising total incurred claims from 1991 through 2019 to $154.4 billion. (Note: 2019 was the most recent year available when this article was written.) Most of these claims were incurred by insurers that no longer sell LTCI. The reported 2019 incurred claims are 11.2 percent higher than the $11.6 billion of incurred claims reported in 2018.

The placement rate dropped from 59.2 percent in 2019 to 57.8 percent in 2020, which is also lower than the 59.0 percent and 58.8 percent placement rates in 2017 and 2018, respectively. Difficulty in collecting underwriting information during the pandemic may have contributed to lower placement rates. Table 23 shows that three-fourths of the reduction in placement rate can be attributed to suspended and withdrawn applications and Table 26 shows that underwriting averaged about 3 days longer. The longer average underwriting time was also likely caused by the pandemic. However, due to 2020 pending applications that will be reported in 2021, as well as the 2019 applications that were pending at the end of that year, some of our statistics such as underwriting processing time do not fully reflect the impact of the pandemic.

About the Survey
This article is arranged in the following sections:

Highlights provides a high-level view of results.
Market Perspective provides insights into the LTCI market.
Claims presents industry-level claims data.
Sales Statistical Analysis presents industry-level sales distributions reflecting data from 8 insurers.
Partnership Programs discusses the impact of the state partnerships for LTCI.

Available here at www.BrokerWorldMag.com:

  • Product Exhibit shows, for 6 insurers: financial ratings, LTCI sales and inforce, and product details.
  • Product Details, a row-by-row definition of the product exhibit entries, with some commentary.
  • Premium Exhibit shows lifetime annual premiums for each insurer’s most common underwriting class, for issue ages 40, 50, 60, and 70 for single females, single males, and heterosexual couples (assuming both buy at the same age), based on $100 per day (or closest equivalent weekly or monthly) benefit, 90-day facility and most common home care elimination period, three-year and five-year benefit periods or $100,000 and $200,000 maximum lifetime buckets, with and without Shared Care and with flat benefits or automatic three or five percent annual compound benefit increases for life. Worksite premiums do not reflect any worksite-specific discount, though some carriers offer this.
  • Premium Adjustments (from our Premium Exhibit prices) by underwriting class for each participant.
  • Distribution by underwriting class for each participant
  • State-by-state results: percentage of sales by state, average premium by state and percentage of policies qualifying for Partnership by state.

MARKET PERSPECTIVE (more detail in subsequent parts of the article)

“Both buy” and married discounts are reaching stable points. In the past year, some insurers lowered couples’ discounts significantly, to the 15 to 20 percent range. One-of-a-couple discounts are also dropping, to the zero to five percent range. The histories of these discounts are related.

When all LTCI had unisex prices, insurers’ single-person prices reflected that single buyers were predominantly female. Couples who bought policies were nearly 50 percent male; insurers did not have to charge them two prices weighted toward females, so they raised the couples’ discount. When the industry converted to gender-distinct pricing, the justification for couples’ discounts decreased substantially; however, large couples’ discounts continued to be common until now.

As an example, a single person price of $1,500 led to a couples’ combined price of $1,800 when couples’ discounts were 40 percent. If insurers took away the couples’ discount when one spouse was declined, consumers would be disappointed that the spouse about whom they were most concerned was declined, and the price for the healthy insured would be 5/6 of their combined price (5/7 if the discount was 30 percent). Fearing that the healthy spouse would refuse the policy, insurers typically cut the discount in half, rather than removing it completely. In the above example, the healthy spouse would have been charged $1,200 to $1,275, depending on whether the couples’ discount was 40 or 30 percent, respectively.

In the 2019 article “Is Your Spouse Contagious?,” Milliman analyzed the additional cost of LTC incurred by people whose spouses already had LTCI claims. As people who are LTC caregivers are likely to have worse LTCI claims experience than single people, a discount is inappropriate if the spouse is uninsurable. Of course, sometimes only one spouse buys even though both are healthy; for example, perhaps one spouse already has coverage. Nonetheless, their results make it hard to justify an across-the-board one-of-a-couple discount.

We summarized the “Is Your Spouse Contagious?” findings in our survey questionnaire, asking what the industry can do to lower claim costs after the claim or death of a spouse. The same five insurers responded to each question and their recommendations mostly cut across both situations. They cited proactive outreach to provide supportive services to help clients age in place, including preventive measures and care management, examples being home safety assessments and technology to monitor an insured’s health if they live alone. Following the death of a spouse, one carrier suggested informal care options with low daily limits which would permit relatives to be paid caregivers and another suggested a new plan of care, answers that seemed to anticipate that the survivor was already on claim. There were some concerns, however, with one insurer indicating that “cost will be a barrier” and another commenting “if appropriate”.

When one spouse is on claim, two insurers suggested offering respite care options to support the non-claim spouse.

Some specific steps the respondents may have had in mind in their general comments include brain fitness training; helping the healthy spouse marshal and manage resources to help the care recipient; access to cognitive tests that provide early detection of cognitive slippage; lifestyle suggestions including diet and sources of prepared meals; home modification projects; document organization; end-of-life planning; tele-medicine; information to access available government benefits and local services; help in finding and evaluating potential commercial caregivers; products and information about reducing risk and/or facilitating improved caregiving; etc.

We noted that the 10-year Treasury yield as of January 1, 2021 was 0.93 percent and asked what insurers projected it would be in 5 and 10 years. The range in five years was scattered between 1.5 to 3.0 percent and in ten years was two to three percent, with four of the five answers being 2.9 to 3.0 percent. Although all envisioned rising interest rates, only two mentioned that it would ease pressure on profit margins.

The June issue of Broker World magazine had an article about the impact of the pandemic which included data from this survey. Rather than repeat that data here, we refer readers to the June issue.

Government-provided LTCI programs continue to be a topic of discussion.

The Affordable Care Act (2010) included a LTCI program (the “CLASS” Act). Criticisms of the design were validated when, after passage of the ACA, the government dropped the LTCI program because it could not find a way to make it work.

Since then, there have been state efforts to create LTCI programs. On January 1, 2022, the Washington Long-Term Care Trust (WLTCT) will begin collecting 0.58 percent payroll tax to fund a $36,500 lifetime pool of money starting in 2025 (the pool of money is intended to inflate according to the Washington consumer price index). The program provides coverage for vested individuals receiving care in the state of WA. Government-provided LTCI programs will be watched closely for their potential impact on LTCI sales.

Since 2009 (varies by jurisdiction), if an insurer concludes that a claimant is not chronically ill, the insurer must inform the claimant of his/her right to appeal the decision to independent third-party review (IR), which is binding on insurers. As shown in our Product Exhibit, most participants have extended IR beyond statutory requirements, most commonly to policies issued prior to the effective date of IR. It is hard to get data relative to IR. Regulators in some states have not set up the required panel of independent reviewers and regulators do not collect IR statistics. Insurers often do not track IR. It is complimentary of the industry’s claims processing that there has not been a clamor for IR; that there have been significantly fewer requests in the past two years; and that insurers have consistently been completely upheld 70 percent or more of the time based on data we have received over the years from insurers and from Steve LaPierre, President of LTCI Independent Eligibility Review Specialists, LLC (LTCIIERS). In other cases, the reviewer might agree with the insurer partly (e.g., that the claimant did not satisfy the triggers initially, while concluding that the claimant satisfied the triggers later).

Current prices are more stable than past prices, partly because today’s prices reflect much more conservative assumptions based on far more credible data and lower assumed investment yields. Three participants have never increased premiums on policies issued under “rate stabilization” laws. The others reported no increases on policies issued since 2015, 2014 (2 insurers), and 2013 (2 insurers). Nonetheless, many financial advisors presume new policies will face steep price increases, and hence may be reluctant to encourage clients to consider LTCI.

As shown in Table 23, the placement rate for the past 8 years has remained at about 60 percent. Improving the placement rate is critical to encourage financial advisors to mention LTCI to clients. The industry may be able to improve placement rates as follows.

  • Utilize E-applications for faster submission and reduced processing time, thereby increasing placement.
  • Pre-qualify an applicant’s health. Effectively and efficiently increasing the percentage of applicants who are pre-qualified will decrease declines.
  • More effective education of distributors by insurers, such as drill-down questions in on-line underwriting guides and eApps.
  • Require cash with the application (CWA). CWA led to about five percent more of the apps being placed according to our 2019 survey.
  • Continue to improve messaging regarding the value of LTCI and of buying now (rather than in the future). Such messaging would increase the number of applications and improve the placement rate by attracting younger and healthier applicants.

Once again, more than 80 percent of our participants’ policyholders exercised their FPOs (future purchase option, a guarantee that, under specified conditions, a policyholder can purchase additional coverage without demonstrating good health). As both the additional coverage and unit price increase over time, FPOs become increasingly expensive, even more so with the price increases that the industry has experienced. The high election rate demonstrates the importance of LTCI to policyholders and the effectiveness of annual (as opposed to triennial) negative-election FPOs. (Negative-election FPOs activate automatically unless the client rejects them, as opposed to positive-election FPOs which activate only if the client makes a request.) At least in some markets and with some designs, policyholders reliably exercise FPOs when they must do so to continue to receive future offers. Considering such FPOs and other provisions, we project a maximum benefit at age 80 of $305/day for an average 58-year-old purchaser in 2020, which is equivalent to an average 2.9 percent compounded benefit increase between 2020 and 2042. Purchasers may be disappointed if the purchasing power of their LTCI policies deteriorates over time.

Linked benefit products are attractive because even if the insured has no LTC claim, their family will receive benefits and because they often have guaranteed premiums and benefits. According to LIMRA, 516,809 stand-alone LTCI and combination (life and LTCI and life and Chronic Illness) policies were sold in 2019 and were distributed as follows, with stand-alone LTCI’s 11 percent market share the same as 2018. (ADB= “Accelerated Death Benefit)

The stand-alone column and the linked-benefit column are both much more significant in terms of LTC protection than indicated above, for the following reasons:

  1. The Accelerated Death Benefit (ADB) provisions do not increase over time. By the time the average claim payment is made, the stand-alone policies’ maximum monthly benefit (on plans with benefit increase features) will have risen significantly. The linked-benefit portion would also have increased significantly.
  2. The stand-alone and linked-benefit policies have significantly lower lapse rates than the policies with ADB. Thus, they are much more likely to be around when care is needed.
  3. The stand-alone and linked-benefit policies may have lower mortality rates because of their better persistency and because they are purchased with LTCI in mind whereas the ADB policies are generally purchased for their life insurance and the ADB benefit may be incidental in the minds of the buyers.
  4. The ADB policies are less likely to be used to pay for care, as it may be preferable to have the death benefit be paid to the beneficiary.

A small offset is that the stand-alone policies are more likely to be reimbursement-based benefits, which are less likely to result in the full benefit being paid each month.

According to LIMRA, in the first half of 2019, combination life sales dropped slightly, but then rebounded strongly in the latter half of the year to finish ten percent higher than 2018 in terms of premium (although, one percent lower in terms of the numbers of policies). However, in the first half of 2020 (the most recent data available as this article was being written), premiums were 19 percent lower and new policies eight percent lower than the weak first half of 2019. In addition to the pandemic, LIMRA noted that the new 2017 CSO Mortality Table and low interest rates led to higher premiums which depressed sales. The policies with the most significant LTCI benefits (linked benefits) dropped the most (27 percent in premium; 21 percent in policy count).

Only four participants offer coverage in all U.S. jurisdictions; no worksite insurer does so. Insurers are reluctant to sell in jurisdictions which have unfavorable legislation or regulations, restrict rate increases, or are slow to approve new products.

All but one of our participants use third party administrators (TPAs) and five of the eight participants use reinsurers. The number of insurers using TPAs for the following functions is shown in parentheses: Underwriting (6), Issue (5), Billing (5), Commissions (3), and Claims (6). Two insurers noted they use their underwriting and claims TPAs for only some functions and another, which responded that it does not use TPAs for underwriting and claims, noted that it sometimes receives help from its TPA, but the TPA never makes the decision. We thank CHCS, DMS, LifeCare Assurance, Long-Term Care Group, RGA, and Wilton Re for their contributions to the LTCI industry. Other reinsurers and TPAs may support insurers not in our survey. In some cases, affiliated companies provide reinsurance or guarantees.

CLAIMS

  • Seven participants reported 2020 claims. As some companies are not able to provide detailed data, some statistics are more robust than others.
  • The insurers’ combined claim payments on individual policies rose 1.6 percent in 2020 over 2019. Two insurers reported a decrease in claims, while the other five insurers reported a 5.2 percent increase.
  • The LTCI industry has had a much bigger impact than indicated above, because a lot of claims are paid by insurers that do not currently sell LTCI or did not submit claims data to us.

LTCI claims paid by insurers no longer selling LTCI may differ significantly from the following statistics as their claimants are more likely to have facility-only coverage, be older, etc.

Table 1 shows the total dollar and number of reported individual and multi-life (not group) LTCI claims. It reflects the same carriers for both years. As noted above, total claims rose only 1.6 percent. The impact of the pandemic is not clear in the data, but some claimants likely died prematurely and/or spurned facility care, particularly nursing home care. Some claimants likely abandoned facilities, thereby losing coverage either because they did not hire commercial home caregivers or because they had a facility-only policy and did not qualify for exemptions that some insurers provided. Claimants and commercial caregivers potentially were hesitant to meet during a large part of the year, likely dampening home care claims.

Table 2 shows the distribution of those claims by venue, which have shifted away from nursing homes over the years (except in 2019) due to consumer preferences and more claims coming from comprehensive policies. The distribution reflects different insurers from year-to-year; 2019’s aberration was caused by the absence of data from an insurer which resumed providing data this year.

The inception-to-date number of claims is surprisingly more weighted to Nursing Home than the dollar of claims. It seems that nursing home claims come from older policies with lower maximum daily benefits.

In the distribution based on number of claims, a person who received care in more than one venue is counted once for each venue, but not double-counted in the total line.
Six carriers reported their number of open individual claims at year-end, ranging between 51 and 81 percent of the number of claims paid during the year, averaging 64 percent overall.

Table 3 shows average size individual claims since inception. Because 41 percent of claimants since inception have submitted claims from more than one type of venue, the average total claim might be expected to exceed the average claim paid for any particular venue. However, individual Assisted Living Facility (ALF) claims stand out as high each year, probably because:

  • ALF claims appear to have a longer duration compared with other venues.
  • Nursing home costs are most likely to exceed the policy daily/monthly maximum, hence nursing home claims are most likely to understate the cost of care.
  • People who maximize the use of their maximum monthly benefits can generally spend as much in an ALF as in a nursing home.
  • Although some surveys report that ALFs cost about half as much as nursing homes on average, ALFs often charge more for a memory unit or for levels of assistance that align more closely with nursing home care. Upscale ALFs seem to cost a higher percentage of upscale nursing home costs than the average ALF/nursing home ratio.

Several insurers extend ALF coverage to policies which originally did not include ALF coverage, providing policyholders with significant flexibility at time of claim, but contributing to the insurers’ need for rate increases.

The following factors contribute to a large range of average claim results by insurer (see Table 3), which results in significant year-to-year differences in Table 3 because different insurers contribute data:

  1. Different markets (by affluence; worksite vs. individual; geography; etc.)
  2. Demographic differences (distribution by gender and age)
  3. Distribution by benefit period, benefit increase feature, shared care and elimination period.
  4. Distribution by facility-only policies vs. 50 percent home care vs. 100 percent home care vs. home care only, etc.
  5. Different lengths of time in the business.

The following factors cause our average claim sizes to be understated.

  1. For insurers reporting claims this year, nine percent of inception-to-date individual claims are still open. Our data does not include reserve estimates for future payments on open claims.
  2. People who recover, then claim again, are counted as multiple insureds, rather than adding their various claims together.

Besides being understated, average claim data does not reflect the value of LTCI from some purchasers’ perspectives, because the many small claims drive down the average claim. LTCI can provide significant financial return for people who need care one year or longer. A primary purpose of insurance is to protect against adverse results, so the amount of protection, as well as average claim, is important.

Five insurers provided their current individual (excludes group) monthly LTCI claim exposure, which exceeds $5 billion (note: reflects only initial monthly maximum for one insurer). As shown in Table 4, this figure is thirty times their corresponding monthly LTCI premium income and more than 41 times their 2020 LTCI monthly paid claims. Eight insurers contributed data regarding their inforce distribution by benefit period. Treating endless (lifetime benefit periods) as a 15-year benefit period, we found that their average inforce benefit period is 6.85 years. Changing the assigned value of the endless benefit period by one year has an impact of approximately 0.25 years on the average inforce benefit period. With annual exposure thirty times annual premium and assuming an average benefit period of about 6.85 years, we estimate that total exposure is 207 times annual premium.

Three insurers reported their current average individual maximum monthly maximum benefit for claimants, with results ranging from $4,121 to $6,729.

Nursing home (NH) claims are more likely to use the policy’s maximum daily/monthly benefit than ALF claims, because ALF daily/monthly costs are generally lower and because policies sometimes have lower maximums for ALFs. ALF claims correspondingly are more likely to use the policy maximum than are adult day care and home care claims.

STATISTICAL ANALYSIS
Bankers Life, CalPERS, Knights of Columbus, Mutual of Omaha, National Guardian, New York Life, Northwestern and Thrivent contributed significant background data, but some were unable to contribute some data. Four other insurers (Auto-Owners, Country, LifeSecure and Transamerica) contributed their number of policies sold and new annualized premium, distinguishing worksite from other sales, but not clarifying whether FPOs were included in the premium.

Sales characteristics vary significantly among insurers based on market differences (individual vs. worksite, affluence, gender distribution, etc.). Year-to-year variations in policy feature distributions may reflect industry trends but may also reflect changes in participants, participant practices and designs, participant or worksite market shares, etc. The statistical differences between the worksite and non-worksite sales will be reported in the August issue of Broker World.

Market Share
Because new coverage is being issued, we include purchased increases on existing policies in new premium (we call them FPOs and include board-approved increase offers). FPOs increased in 2020, cushioning the reduction in premium from new sales. Removing FPOs spotlights insurers with more new policy sales. Table 5 lists the top 8 participants in 2020 new premium including FPOs and without FPOs. Northwestern ranks #1 including FPOs, with Northwestern and Mutual of Omaha accounting for 60 percent of the market. Ignoring FPOs, Mutual of Omaha is #1. The premium includes 100 percent of recurring premiums plus ten percent of single premiums.

Worksite Market Share
After a strong 2019, worksite premium dropped about 15 percent in 2020, accounting for a lower percentage of total sales than in 2019. It is possible that the worksite market could have produced a bigger percentage of total sales than in 2019 had the pandemic not occurred. However, with Transamerica leaving the market and other changes, the future of the worksite LTCI market (except executive carveout) is unpredictable. LifeSecure, Mutual of Omaha, and National Guardian may pick up market share; linked-benefit worksite products might pick up market share; and/or LTC risk covered in the worksite might drop.

Worksite sales consist of three different markets, the first two of which produce a higher percentage of new insureds than of new premiums:

  • Voluntary group coverage generally is less robust than individual coverage.
  • Core/Buy-Up programs have particularly young age distributions and modest coverage because a lot of people do not buy-up and are less likely to insure spouses.
  • Executive carve-out programs generally provide the most robust coverage. One- or two-couple executive carve-out sales may not qualify for a multi-life discount with some insurers, hence may not be labeled as worksite sales in submissions to our survey.

The amount of worksite sales reported and its distribution among the three sub-markets significantly impact product feature sales distributions. Table 6 is indicative of the full market (including our estimates for two insurers which did not report sales), but this year’s policy feature distributions significantly underweight the voluntary and core/buy-up markets, as most of those markets are not reflected in our statistical data. More information about worksite sales will appear in the August issue of Broker World magazine.

Affinity Market Share
Affinity groups (non-employers such as associations) produced 8.1 percent of new insureds (see Table 7), and 6.0 percent of new business premium. Less than 20 percent of the lower affinity average premium is attributable to the affinity discount. The balance may be due to younger issue age or less robust coverage. It would seem that, over time, an increasing number of associations would have discounts, which might cause the affinity group percentage to increase over time, but our data does not demonstrate such a pattern.

Characteristics of Policies Sold
Average Premium Per Sale
The average new business (NB) premium per insured (Table 8), subtracting FPOs for the insurers that reported statistics, and the average premium per buying unit (a couple comprise a single buying unit) increased six to seven percent each to $2,706 and $3,847, respectively.

Data for 2018 and earlier years included FPOs in these calculations, overstating the average premium per new insured and buying unit.

Average premium per new policy ranged from $1,029 to $3,792 among the 12 insurers.
The lowest average new premium (including FPOs) was in Puerto Rico ($2,511), followed by Indiana ($2,642) and Kansas ($2,915), while the highest was in the District of Columbia ($5,336), followed by Connecticut ($4,820), and New York ($4,656).
For those insurers which reported results for 2019 and 2020, the average inforce premium (reflecting rate increases, FPO elections and termination of older policies) increased from $2,246 to $2,309, a 2.8 percent increase. However, Table 8 shows a decrease due to a change in insurers reporting inforce premium.

Issue Age
Table 9 summarizes the distribution of sales by issue age band based on insured count. The average issue age remained 57.7. All insurers reported an average issue age between 55 and 60. The age distributions for 2016 and earlier had more worksite participants than recent years. Note: one survey participant has a minimum issue age of 40, one will not issue below 30, and one will not issue below 25.

Benefit Period
Table 10 summarizes the distribution of sales by benefit period. For the first time since 2014, endless benefit periods registered a measurable percentage, albeit only 0.2 percent. The average benefit period for limited benefit period policies dropped back to 3.75, but if we treat endless benefit periods as 15 years, the average benefit period was 3.82. Because of Shared Care benefits, total coverage was higher than the 3.75 average suggests. Three-year benefit periods accounted for 52.9 percent of the sales.

Monthly Benefit
Monthly determination applied to a record 83.0 percent of 2020 policies (Table 11). With monthly determination, low-expense days leave more benefits to cover high-expense days. One insurer offers only daily determination; one insurer offers a choice; and the other insurers automatically have monthly determination.

Table 12 shows the largest concentration ever in the $4,500-$5,999 initial monthly maximum range (32.3 percent). The average maximum monthly benefit increased slightly to $4,888.

Benefit Increase Features
Table 13 summarizes the distribution of sales by benefit increase feature. Most notably, only 14.6 percent of the policies were sold without a benefit increase feature.

“Indexed Level Premium” policies are priced to have a level premium, but the benefit increase is tied to an index such as the consumer price index (CPI).

As shown in Table 14, we project the age 80 maximum daily benefit by increasing the average initial daily benefit from the average issue age to age 80, according to the distribution of benefit increase features, using current future purchase option (FPO) election rates and a five percent/year offer for fixed FPOs. The maximum benefit at age 80 (in 2042) for our 2020 average 58-year-old purchaser projects to $305/day (equivalent to 2.9 percent compounding). Had our average buyer bought an average 2019 policy a year ago at age 57, her/his age 80 benefit would be $316/day (equivalent to 2.9 percent compounding). Most policyholders seem likely to experience eroding purchasing power over time if cost of care trends exceed three percent.

FPOs are important to insureds in order to maintain purchasing power, and 82 percent of our participants’ 2019 to 2020 FPOs were exercised. The high election rate is noteworthy, considering that the cost increases each year due to larger coverage increases each year, increasing unit prices due to age, and additional price increases due to rate increases.

One insurer had an election rate of 91 percent, two insurers had 68 to 70 percent, two insurers had 43 to 45 percent, and one insurer had 19 percent. It seems clear that higher election rates occur if FPOs are more frequent (every year vs. every 3 years) and are “negative-election” (activate automatically unless the client rejects them) as opposed to “positive-election” (which activate only if the client makes a request). At least some blocks of business demonstrate that policyholders will exercise FPOs if they must do so to continue to receive future offers.

FPOs are also important to insurers, accounting for at least 22 percent of new premium in 2020. Two insurers had nearly half their new premium come from FPOs.

Elimination Period
Table 16 summarizes the distribution of sales by facility elimination period (EP). Ninety-two percent (92 percent) of buyers opt for elimination periods between 84 and 100 days. The percentage of EPs of 100 days or more was 5.2 percent, lower than any other year in the table.

Table 17 shows the percentage of policies with zero-day home care elimination period (but a longer facility elimination period). For insurers offering an additional-cost zero-day home care EP option, the purchase rate is sensitive to the cost.

Table 17 also shows the percentage of policies with a calendar-day EP. It is important to understand that most calendar-day EP provisions do not start counting until a paid-service day has occurred.

Sales to Couples and Gender Distribution
Table 18 summarizes the distribution of sales by gender and single/couple status.

In 2012, the last year in which all sales were unisex, 54.9 percent of buyers were female. In 2013, the female percentage spiked to 57.2 percent as females purchased unisex pricing that was still available. Since unisex pricing has disappeared entirely except in the worksite, the female percentage has plateaued at slightly above 54 percent. The percentage of females varies significantly based on an insurer’s markets. This year, the percentage of females varied from 45 to 63.9 percent among insurers.

The percentage of accepted applicants who purchase coverage when their partners are declined also varies significantly by insurer based on their couples’ pricing and their distribution system. Few insurers are able to report this data.

Shared Care and Other Couples’ Features
Table 19 summarizes sales of Shared Care and other couples’ features.

  • Shared care allows one spouse/partner to use the other’s available benefits if their own coverage has been depleted or offers a third independent pool that the couple can share.
  • Survivorship waives a survivor’s premium after the first death if specified conditions are met.
  • Joint waiver of premium (WP) waives both insureds’ premiums if either qualifies for benefits.

Changes in distribution between carriers can greatly impact year-to-year comparisons in Table 19, because some insurers embed survivorship or joint waiver automatically (sometimes only in some circumstances) while others offer it for an extra premium or do not offer the feature.

In the top half of Table 19, percentages are based on the number of policies sold to couples who both buy (only limited benefit, for Shared Care). The bottom half of Table 19 shows the (higher) percentage that results from dividing by sales of insurers that offer the feature. For insurers reporting Shared Care sales, the percentage of both-buying couples who opted for Shared Care varied from 8 to 89.7 percent. The corresponding percentage of couples with Joint WP varied from 10 to 100 percent and for Survivorship ranged from 2.1 to 14.1 percent.

Table 20 provides additional breakdown on the characteristics of Shared Care sales. As shown on the right-hand side of Table 20, two- to four-year benefit period policies are most likely (26 to 31 percent) to add Shared Care. Partly because three-year benefit periods comprise 53 percent of sales, most policies with Shared Care (61 percent) have three-year benefit periods, as shown on the left side of Table 20.

Above, we stated that Shared Care is selected by 36.4 percent of couples who both buy limited benefit period policies. However, Table 20 shows Shared Care comprised no more than 31 percent of any benefit period. Table 20 has lower percentages because Table 19 denominators are limited to people who buy with their spouse/partner whereas Table 20 denominators include all buyers.

Shared Care is more concentrated in two- to four-year benefit periods (88.4 percent of shared sales) than are all sales (73.0 percent). Couples are more likely to buy short benefit periods because couples plan to help provide care to each other and Shared Care makes shorter benefit periods more acceptable. Single buyers are more likely to be female, hence opt for a longer benefit period.

Existence and Type of Home Care Coverage
Four participants reported sales of facility-only policies, which accounted for 0.7 percent of total sales. One insurer was responsible for more than 80 percent of such sales. Ninety-six percent (96.4 percent) of the comprehensive policies included home care benefits at least equal to the facility benefit. No participant has reported home-care-only sales since 2018.

Other Characteristics
As shown in Table 21, partial cash alternative features (which allow claimants, in lieu of any other benefit that month, to use between 10 and 40 percent of their benefits for whatever purpose they wish) were included in 52.5 percent of sales, including non-participant sales.

Return of premium (ROP) features were included in 10.4 percent of policies. ROP returns some or all premiums (usually reduced by paid LTCI benefits) when a policyholder dies. Approximately 75 percent of ROP features were embedded automatically in the product. Embedded features are designed to raise premiums minimally, typically decreasing the ROP benefit to $0 by age 75.

Nearly sixteen percent (15.8 percent) of policies with limited benefit periods included a restoration of benefits (ROB) provision, which typically restores used benefits when the insured has not needed services for at least six months. Approximately 90 percent of ROB features were automatically embedded.

Insurers must offer shortened benefit period (SBP) coverage, which makes limited future LTCI benefits available to people who stop paying premiums after three or more years. The insurers able to report SBP sales, sold SBP to 3.7 percent of buyers.

Only one insurer issued non-tax-qualified (NTQ) policies, which accounted for 0.1 percent of industry sales.

“Captive” (dedicated to one insurer) agents produced 53.1 percent of the coverages. Brokers produced 46.3 percent and a direct-to-consumer carrier accounted for 0.6 percent. At one time, “captive” agents who sold LTCI tended to specialize in LTCI. Now many are agents of mutual companies.

Sales distribution by jurisdiction is posted on the Broker World website.

Limited Pay and Paid-Up Policies
In 2020, two insurers sold policies that become paid-up in 10 years or less, accounting for 1.1 percent of sales, the highest percentage since 2014, as shown in Table 22.

Because today’s prices are more stable, premium increases are less likely. One of the key reasons for buying 10-year-pay (avoidance of rate increases after the 10th year) is greatly reduced, while the cost of 10-year-pay has increased, making it less attractive than in the past. Nonetheless, limited-pay and single-pay policies are attractive to minimize post-retirement outflow and to accommodate §1035 exchanges.

Seven participants reported that 3.0 percent of their inforce policies are paid-up, a lower percentage than last year because an additional insurer participated.

PARTNERSHIP PROGRAM BACKGROUND
When someone applies to Medicaid for long-term care services, most states with Partnership programs disregard assets up to the amount of benefits received from a Partnership-qualified policy (some Indiana and New York policies disregard all assets). Except for California, states with Partnership programs grant reciprocity to Partnership policies issued in other jurisdictions. Partnership programs are approved in 44 jurisdictions, all but AK, DC, HI, MA, MS, UT, and VT, but MA has a similar program (MassHealth).

Four states (CA, CT, IN and NY) blazed the trail, legislating variations of the Robert Woods Johnson approach (“RWJ” states), whereas “DRA” states use simpler, more consistent rules developed later, in the Deficit Reduction Act of 2005. For example, RWJ states require a separate Partnership policy form, generally still have more stringent benefit increase requirements and sometimes assess a fee for insurers to participate (none of which apply in DRA states).

Approximately 60 percent of Partnership states now allow one percent compounding to qualify for Partnership, which can help low-budget buyers qualify for Partnership and also enables worksite core programs to be Partnership-qualified. A higher percentage of policies would qualify for Partnership in the future if insurers and advisors leverage these opportunities. However, currently only three insurers offer one percent compounding.
Partnership programs could be more successful if:

  1. Advisors offer small maximum monthly benefits more frequently to the middle class. For example, a $1,500 initial maximum monthly benefit covers about four hours of home care every two days and, with compound benefit increases, may maintain buying power. Many middle-class individuals would like LTCI to help them stay at home while not “burning out” family caregivers and could be motivated further by Partnership asset disregard. (This approach does not work in RWJ states with high Partnership minimum daily benefit requirements.)
  2. Middle-class prospects were better educated about the importance of benefit increases to maintain LTCI purchasing power and to qualify for Partnership asset disregard.
  3. The four original Partnership states migrate to DRA rules.
  4. More jurisdictions adopt Partnership programs.
  5. Programs that privately finance direct mail educational LTCI content from public agencies were adopted more broadly.
  6. Financial advisors were to press reluctant insurers to certify their products and offer one percent compounding.
  7. More financial advisors were certified. Some people argue that certification requirements should be loosened. At a minimum, the renewal certification process could be improved.
  8. Linked benefit products became Partnership-qualified.

PARTNERSHIP PROGRAM SALES
Participants reported Partnership sales in all 44 authorized states except CT and NY. No participant sold Partnership policies in more than 41 states in 2020. Two had Partnership sales in 38 states, three in 29 to 34 states, one in 1 state, and the other has chosen not to certify Partnership conformance.

Insurance brokers do not have access to Partnership policies in CA, CT and NY and from only one insurer in IN. However, in some of those states, consumers can purchase Partnership-qualified coverage from one or two other entities.

In the DRA states, 55 percent of policies qualified for Partnership status. Minnesota (81.4 percent) leads each year. Georgia, Maine and Wisconsin were also above 70 percent.

The original RWJ states had few Partnership sales. In New Mexico, a recent Partnership state, only 4.7 percent of sales qualified, which should increase in the future. Kentucky had only 25.2 percent.

UNDERWRITING DATA
Case Disposition
Seven insurers contributed application case disposition data to Table 23. In 2020, 57.8 percent of applications were placed, the lowest ever, seemingly impacted by the pandemic. One insurer reported a 76.4 percent placement rate; all others were below the average, with three insurers between 40 and 47 percent.

Decline rates and suspended/withdrawn rates hit records. While we thought the suspended/withdrawn rate would rise with the pandemic, of the six insurers who have reported such data for both 2019 and 2020, two had a noticeably lower suspended/withdrawn rate in 2020 and two were +/-0.1 percent.

Decline rate by carrier varied from 11.9 to 38.4 percent, but all but two insurers were between 23.2 and 29.1 percent, varying based on factors such as age distribution, distribution system, market, underwriting requirements, and underwriting standards. Our placed percentages reflect the insurers’ perspective. A higher percentage of applicants secures coverage because applicants denied by one carrier may be issued either stand-alone or combo coverage by another carrier or may receive coverage with the same insurer after a deferral period.

Table 24 shows that, compared to 2019, the placement rate increased below age 60 and decreased above age 60, which seems consistent with a theory that the lower placement rate was related to the pandemic. This data is a subset of the placement data in Table 23.

Low placement rates increase insurers’ cost per placed policy. More importantly, low placement rates discourage advisors from discussing LTCI with clients. In addition to not wanting to waste time and effort, advisors fear that declined clients will be dissatisfied. In the Market Perspective section, we listed ways to improve placement rates. This is a critical issue for the industry. If readers have suggestions, they are invited to contact the authors.

Underwriting Tools
Six insurers contributed data to Table 25, which divides the number of uses of each underwriting tool by the number of applications processed. For example, the number of medical records was 82 percent of the number of applications. That does not mean that 82 percent of the applications involved medical records, because some applications resulted in more than one set of medical records being requested.

Insurers are trying to speed underwriting to increase placement rates. In the worksite market, insurers are less likely to use some of these tools.

Year-to-year changes in distribution of sales among insurers significantly impact results. Lower maximum ages result in fewer face-to-face exams. Insurers might underreport the use of an underwriting tool because they may lack a good source for that statistic. For example, an insurer might not be able to split phone interviews by whether or not they include cognitive testing.

The biggest change was the drop in Face-to-Face assessments, perhaps because it was hard to schedule them due to the pandemic.

Underwriting Time
Table 26 shows the average processing from receipt of application to mailing the policy time (40 days) reversed the trend of speedier processing. Of the six insurers that reported this data in both 2019 and 2020, the three fastest processors of 2019 all got faster and the three slower processors of 2019 all got slower, expanding the range from 28.9-60.3 to 26.9-65.9.

Rating Classification
Table 27 shows that a lower percentage of policies was issued in the most favorable rating classification, but the highest percentage was placed in the two most favorable classes since 2012. That’s surprising because prior to 2016, we had more worksite business in the rating classification table. For more information, look for the August issue of Broker World magazine where we will separate data by worksite vs. non-worksite business.

Only 7.7 percent of policies were issued beyond the second-best classification, but three insurers placed 11.0 to 12.4 percent of policies in such a class and another insurer placed 19.2 percent of policies in such a class.

Two insurers placed more than 80 percent of their applicants in the best underwriting class. The other five insurers placed 19 to 25 percent in their best class.

Lastly, Table 27 shows the percentage of decisions which were either declined or placed in the 3rd or less-attractive classification is reducing. Hence, we conclude that industry is making more favorable decisions rather than declining applicants in lieu of giving them a substandard rating,

Tables 28 and 29 show the 2020 percentages of policies issued in the most favorable category and decline decisions by issue age. Tables 27 and 28 do not exactly match Table 26 because some participants provide all-age rating or decline data. The percentage placed in the most favorable classification increased for ages 65 and older, likely statistical fluctuation. Although overall decline rates increased, the by-age decline rates decreased, except for under age 30; that anomaly results because only some insurers can provide decline data by issue age.

CLOSING
We thank insurance company staff for submitting the data and responding to questions promptly. We also thank Sophia Fosdick, Margaret Liang, Nicole Gaspar, and Alex Geanous of Milliman for managing the data expertly.

We reviewed data for reasonableness and insurers reviewed their product exhibit displays. Nonetheless, we cannot assure that all data is accurate.

If you have suggestions for improving this survey (including new entrants in the market), please contact one of the authors.

Reference:
Society of Actuaries (November 2016). Long-Term Care Insurance: The SOA Pricing Project. Retrieved May 16, 2020, from https://www.soa.org/globalassets/assets/files/static-pages/sections/long-term-care/ltc-pricing-project.pdf (PDF).

The Enhanced Flexibility Of Today’s VUL

Clients need flexibility in financial and insurance products as their circumstances change through life. When they age and face new challenges, the financial products they put their faith in should be able to adjust to directly address those needs. Historically, many financial and insurance products were built to service a single need, but through the decades these products have evolved to meet the demands of a consumer that values choice and flexibility. In the permanent life insurance world we have seen continual evolution towards that end, and I would argue the most dramatic change has been within the variable universal life or VUL product arena. Due to a series of regulatory adjustments starting with actuarial guideline 38, followed by 49 and 49-A, coupled with a very low interest rate and resilient stock market environment, it has shifted some of the attractiveness towards the VUL side of the spectrum. None of those actuarial guidelines mentioned had an impact on VUL.

In 2013, AG 38 shifted the spectrum from traditional GUL to lifetime no-lapse guaranteed VUL products, often referred to as GVUL, creating a situation where more death benefit could be purchased per premium dollar with VUL while maintaining the guarantees compared to GUL/UL. AG 38 increased the reserve requirements for a carrier’s general account products which had a negative pricing impact for certain products. At that time there was one specific GVUL product available, but now there are several. Outside of the death benefit guarantee, VUL added the flexibility of cash value accumulation potential for the customer that GUL simply could not provide for potential income needs or 1035 exchange opportunities down the road. AG 49, and subsequently AG 49-A, put pressure on the indexed universal life or IUL market via specific guidelines on product specifications along with illustration requirements. That forced many carriers to integrate their multiplier IUL options, along with more traditional IUL options, within the VUL chassis as sub-account options instead. This adds tremendous flexibility to the VUL offering where previously there were no such options available for downside protection outside of the fixed accounts for VUL. Now a customer can invest some or all their cash value within these indexed accounts, between 50 and 100 equity, fixed income, or alternative investment options depending on the carrier, or within the fixed account options. Cash value volatility control becomes important as a client’s risk tolerance changes as they get older, or they decide it is time to take income. Without many being aware of it, suddenly, VUL has become one of the most flexible permanent life insurance solutions available–regardless of a protection or accumulation-based design–simply with the addition of these new features. Additionally, every carrier has their value-added nuances, such as John Hancock’s popular Vitality program, business solution support teams, as well as many offering survivorship or SVUL products in addition to their single life lineups.

Popular VUL carriers with age 120+ no-lapse guarantee availability:
Lincoln, Prudential, Securian and Nationwide (via ENLG rider)

So now you have a situation where VUL offers a range of no-lapse guarantees depending on product, IUL sub-account options for downside protection when needed, and typically a chronic illness rider with many policies as standard. For example, Prudential’s popular Benefit Access Rider (BAR) is an add-on that many agents and clients utilize. On top of that there are a handful of fantastic carriers that offer long term care riders for the “what if I get sick” scenario. This option is what I would refer to as a “combo” sale, to supplement what a client has perhaps already planned for in terms of long term care coverage. We all know how much assisted living costs, and the ability to accelerate the death benefit to provide a pool of cash either on an indemnity or reimbursement basis is adding another layer of flexibility to the product. Obviously a long term care rider comes at an additional cost that needs to be taken into consideration by both the retail representative and the client, but it at least provides that option.

As it pertains to this topic, a particular carrier who has offered a long term care rider since 1999 has been Nationwide Financial. Currently, the rider is utilized in 45 percent of their policies where it is available. It is one of the only indemnity style riders available among the carriers and we have seen considerable traction with this solution. Nationwide has what I would consider a very balanced VUL offering with this rider, along with a strong sub-account lineup, indexed options, and available no-lapse guarantees.

Popular VUL carriers with available LTC riders:
Nationwide, John Hancock, Lincoln and Equitable

A primary barrier to entry to access the VUL market for general agents and insurance producers is the fact that it requires securities licensing and a registration with a broker-dealer. Offering VUL requires an insurance license, the FINRA Securities Industry Essentials (SIE) along with the top-off Series 6 and Series 63 exams in most states.

Securities licensing needed to market VUL products:
Securities Industry Essentials (SIE), Top-off Series 6, Series 63 (Most states)

As regulation continues to change, whether that comes from the NAIC, FINRA, the SEC, or Department of Labor (DOL), it may be advantageous to obtain these licenses as an insurance producer or general agent to remain competitive. Not all broker-dealers are geared for the insurance industry, although there are many to choose from for a potential affiliation and registration. If you are not able to offer these solutions, your agents and customers may be forced to go to your competition. This VUL market has evolved to offer some very competitive and flexible solutions that are certainly worth consideration as you think about the future of your business or agency.

Life And Annuity Inforce Policy Service Innovations

There have been many recent technology advancements in life insurance and annuity policy owner service processing. Back in the day the agent or the policy owner had to call a life carrier’s toll-free phone number to speak to a customer service representative who would then mail forms to the policy owner to complete and mail back. A simple beneficiary change could take weeks. Later, using fax machines and email, the process accelerated but was still not efficient. In recent years the next iteration was carriers building client account portals on their website. The portal would provide some policy information and the ability to download a PDF form and upload it to send it to the carrier. These client portals later had more self-service capabilities. This leads us to today, with taking life and annuity inforce policies and leveraging data for advisor servicing, analysis, mobile consumer self-service, and carrier policy admin automation.

Agent Inforce Policy Management Platform Through Data Analytics
As a distributor, your success depends largely on your advisors’ success. At times that codependency can be a source of tension, especially if you’re not both equipped with processes and tools that help you optimize your efforts and output. For example, you may want your advisors to do routine policy reviews on their entire inforce book because you know that practice often leads to meaningful conversations with clients that lead to new sales opportunities. But for advisors with large books of business that’s an unmanageable task. If left to their own manual devices, those reviews simply won’t get done and your advisors will be unknowingly leaving all those sales opportunities untapped. Even if you provide them with a platform that consolidates all their inforce data, it’s still not enough.

A solution to this problem would be an Inforce Policy Management Platform like the one offered by Proformex, which provides actionable, intelligent data that is prioritized for you and your advisors. Proformex surfaces opportunities and risks so you know with just a few clicks which policies need you and your advisors’ attention most. That’s inforce management made smarter, not harder, thanks to powerful data analytics and technology. Proformex’s automated policy monitoring is crucial to meeting the policyowner expectations throughout the life of their contract.

Another inforce policy management platform for distributors and agents is NIC developed by Insured Connect. NIC is a multi-carrier inforce data and technology platform that empowers life insurance distributors and agents with access to their inforce life and annuity data. NIC partners directly with carriers to receive daily data feeds and automatically generate sales and service opportunities from the inforce data, helping distributors and agents to monetize their book. Through APIs the inforce data can be integrated with agency management systems, CRMs, and other marketing systems for the purpose of creating sales and marketing campaigns. This also eliminates the need of having to go to carrier websites to see inforce policy information.

Consumer Mobile Inforce Self-Service
San Jose-based insurtech leader Sureify recently held a webinar to address the relatively slow progression of life insurers toward self-service initiatives. Connecting to older or multiple systems can be difficult, and the industry as a whole has been reluctant to upgrade core systems that can integrate with the new digitized mobile environment. The company’s LifetimeSERVICE module solves a major dilemma for insurers–it provides a digital solution that meets the growing demand for self-serve capability, but it integrates directly with policy administration systems for a comprehensive digital transformation eliminating the need to start from scratch with implementation.

Sureify CEO Dustin Yoder says that the industry understands the value of offering more robust customer self-service, but some still have not made the move to put the end user’s experience at the center of development for self-service initiatives. “Many insurers we talk to start with what can—or can’t—be done based on the limitations of their core systems,” he said. “In truth, those core systems must be modernized through digital means to alleviate pain points. Anything that begins with what the policyholder wants is worth the effort and will deliver results.”

Carrier Policy Admin System Automation for Servicing Annuities
MDI, Management Data, Inc., has worked with long-time customer National Catholic Society of Foresters (NCSF) to implement a new online quoting for single premium annuities and for supplementary contract payouts. Previously, if a policy owner wanted to know how much monthly income would be available from withdrawal, surrender, or claims proceeds, NCSF would have to refer this request to the actuarial department to get the calculations done. Then a policy service rep would communicate the information to the customer.

Now the policy service rep can go to their FIMMAS policy administration quote screen for annuity/supplementary contract payouts. They enter some basic info, select a specific payout option, and then get an immediate quote of the calculated monthly income. This calculation for supplementary contracts uses the greater of a) the result based on current annuity mortality and interest, and, b) the result based on the mortality and interest guaranteed in the original product.

Lisa Bickus, NCSF CEO, says, “We needed help rolling out new products in a more cost effective, timely and efficient manner. The MDI system is simple to use and a valued and trusted partner that wants to ensure our success.” FIMMAS quoting saves NCSF much time in the workflow and allows policy service to provide quick info to the policy owner or agent. Also, the quotes can be saved and several variations of the quotes can be run. The same calculations used in quoting are also used in FIMMAS new business when processing a new annuity or supplementary contract case.

Advanced Data Analytics Driving the Life New Business and Inforce Servicing Process
Automated risk decision making and data analytics has been woven into the fabric of life insurance new business and inforce policy service processes from digital point of sale to carrier back-office systems. In the center of it all is LexisNexis. So, I reached out to Jena L. Kennedy, senior director, Life Vertical Market, at LexisNexis Risk Solutions:

“Even as a global pandemic has served to be one of the most powerful drivers of digital transformation the life insurance industry has seen, we believe there are important lessons to be learned. Most companies would be wise to understand that it’s not enough to just ‘go digital.’ In fact, if your approach is simply to automate an existing paper or manual process, you’ve missed the point. And that point is to intelligently leverage data and analytics to improve your workflow processes—not simply automate them.

Then, beware of tunnel vision: Understand that automation need not focus exclusively on underwriting. Think about the other points of contact that you have with consumers. Whether collecting data for an application, enabling self-service, or facilitating a claim, all of these ‘moments of truth’ are ripe for transformation and improvement, courtesy of data and advanced analytics. Do you provide a seamless consumer experience, pre-filling consumer data and verifying identity credentials? Introducing the right data and analytics can help substantially reduce the number of data collection points and can provide insight to help producers ensure they are submitting accurate data.

In fact, we are focused on providing producers with more insight at the point of sale/application to enable higher placement ratios, help determine the most appropriate payment plans for improved retention and customer satisfaction, and even identify proposed insureds who are most likely to pass automated underwriting. Using data and analytics at the point of service can also enable faster, more flexible, self-service options that help consumers feel in control but at the same time demonstrate that you will safeguard their data and their privacy.

We believe that the organizations who take the time today to properly optimize the use of data and analytics in their workflows will reap the benefits. According to McKinsey, ‘Companies that successfully deliver a remarkable digital experience while also keeping customers’ data safe can see a potential 20 to 35 percent boost in customer-satisfaction scores.’”1

The Future of Innovation for Life and Annuities
Where are we heading next for life and annuity innovation? Artificial intelligence (AI) has spawned a new field called “augmented analytics” which takes business intelligence to the next level of crunching vast amounts of data that can be applied to improve efficiencies in the life and annuity new business and inforce processes. AI will be used to build better customer experiences and use machine learning to automate tasks. Since the 72 million Millennials in the USA spend on average 3.7 hours per day on their mobile devices, it makes sense for carriers to invest in engaging with their policy owners in the mobile environment. IOT devices (wearables) for health and wellness will continue to grow for both customer engagement/retention as well as impacting the premium amount clients pay. Behavior economics will also play a role in the future of life insurance and annuities. Vendors are already creating algorithms to monitor books of insurance business online browsing habits. A customer, for example, who is looking online for a mortgage becomes a flagged event that they may need some more life insurance. These are models that Facebook and Amazon use for advertising products that have a specific interest to the consumer or related to the product they are purchasing. Stay tuned…

Reference:

  1. https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/is-cybersecurity-incompatible-with-digital-convenience.

The Sister Sale

As we expand our businesses and look for alternative revenue streams to supplement the financial planning and life insurance products we are selling, many of us are looking for new ideas and new products that complement our current sales processes and customer base.

For example, if I am meeting with a prospective client who is interested in purchasing a final expense product I may have a conversation with them about buying a children’s whole life policy for their grandchildren (see “Don’t Forget the Babies” in Broker World, July 2019) or an annuity, prescription drug plan, dental coverage or Medicare supplement policy. Many refer to this as a cross-sell.

For my team and I, we refer to it as the “sister sale.

Sister sales happen all around you, every day. For example, when you access a popular online retailer to have items delivered to your home, there is often a list of products at the bottom of the page that says “inspired by your shopping trends.” That retailer realizes that if you bought one product, there are complementary products you also may want to buy.

If you remember your microeconomics course from college, we studied complementary products. For example, sugar and cream are examples of products that have an interrelated use with another good, such as coffee or tea. So, if sales of coffee dipped, so might the sales of cream and sugar. Conversely, if sales of coffee spiked, you might see a rise in sugar and cream sales, regardless of the price of the complementary items.

The P&C industry effectively cross-sells by offering bundles, meaning you can save more money if you purchase your home and auto insurance together. While this works for a commodity like property and casualty insurance, it is not always the case for financial products because there must be a perceived value to the customer. Even if they are told the price is less, if they see no value in having it the customer still won’t spend the money. While perceived value is also important for the P&C sale, a lot of times the customer is purchasing because insurance is required on the home for a loan or for the auto to legally drive in the state. The life insurance customer is not “required” to purchase life insurance, or other products such as critical illness or long term care—that is of course unless their spouse is requiring it.

This brings us to our sister sales idea. Whether you are a seasoned agent or a newer agent, the following may apply to you:

  • You need to earn commissions now to pay for leads or just to build your business.
  • You would love a way to secure your future and earn larger trail commissions.
  • You have your typical sales pitch and you know the drill:
    • Final expense
    • Mortgage term sales
    • Policy review
    • Income replacement

If any of these points apply to you, the sister sales idea may be just what you need. And it really boils down to asking prospects one simple question: Who provides your cancer, heart attack or stroke insurance coverage?

When you ask this question, it naturally leads to multiple follow-up questions:

  • Wait, you don’t have cancer or heart attack and stroke coverage?
  • Are you concerned at all about getting cancer or having a heart attack or stroke?
  • You have health insurance, that’s great, what’s your deductible?
  • Are you concerned about the “hidden costs” or expenses you might incur should something like this happen?
  • If something like this would happen, would an extra $10,000, $20,000 or $30,000 in your pocket make your life easier?
  • A 60-year-old male can get $10,000 of coverage for just $20 per month.
  • Can I run you a quick quote?

This leads to the second part of the conversation and the intrinsic or emotional part of the sale.

  • Do you know anyone who was diagnosed with cancer?
  • What would you do if you got that news?

The critical illness products available from many carriers provide a way for someone who has probably gotten the worst news of their life to help plan for unforeseen or unexpected costs, get their affairs in order, or even live out a dream.

  • Living the dream could mean taking the family on a vacation or buying something you have always wanted but could never afford.
  • Getting your affairs in order could mean paying off debts or bills so your surviving spouse will not have to worry about paying them off or finally having the money to pay a lawyer to write up a will.
  • And of course, there may also be unknown or unexpected expenses that also occur with a major event such as a heart attack, stroke or cancer. What if you were in a hospital and your spouse needed a hotel or airfare to be with you? Or what if you needed a wheelchair and needed to build a ramp in front of your home to get up the stairs?

The Benefit to You
Most carriers, mine included, levelized the compensation on these products for the entire life of the product. What this means to you is better trails and a way to build a larger stream of income for your future. Let’s take a simple example and assume 10 percent trails for every year after year one. If you just sold five cases per month, at $50 in ANBP per case, that would equal 60 cases per year at $300 ANBP per annum. You would earn an extra $3,600 per year in trails (not including the first year’s commission). This might not sound like a huge number, but after 20 years would give you an additional $72,000 per year in trails. Imagine what the number would be if you could double or even triple your sales or sell higher premiums! The rewards are significant.

For Me…
It is hard for me to admit that I am approaching 60. It is even harder for me to think about the fact that I lost two very dear friends of mine this year who were both not yet 60. I have been in the insurance industry for 30 years now and I have a great passion for what we do. I am never embarrassed to talk about the protection we provide. People need to be educated about their insurance options so they see the value and what it will mean in their lives should a tragic event happen.

Your Call to Action

  • Ask the question! Who provides your cancer, heart attack and stroke coverage?
  • Ask every client, family member and friend you have!
  • Go back to clients you wrote in the past and ask.
  • Ask everyone you know age 50 and older.
  • Write the application, no matter how big or small.
  • You can write at least $10K of coverage today and I bet you are even thinking of someone to talk to about this right now.

Most importantly, make critical illness products a regular part of your agent and client discussions. Everyone knows someone who can use this product.

Happy selling!

LTCI During The Pandemic

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The pandemic challenged long term care insurers in several respects. This article describes some of the ways that insurers made exceptions to help policyholders during the pandemic, underwriting practices they chose and the potential impact on pricing.

Claims processing during the Pandemic
Some long term care insurance companies offered outstanding accommodations to support claimants and their families during our unprecedented pandemic. Despite the losses which insurers incur on LTCI policies and their reluctance to set precedents which could come back to haunt them, some insurers belied the theory that they focus on how to avoid paying claims.

Here is a partial list of actions that some LTCI companies’ claims departments took in order to serve their clients better.

  1. Paid for home care when people moved from facilities to home care (even if the policy did not cover home care), perhaps done by temporarily broadening what could be covered under an alternative plan of care provision or with an extracontractual letter that included a statement of Reservation of Rights to avoid setting precedent or a claim of waiver or estoppel.
  2. Paid for care by family members, even for policies that did not cover the cost for family members or had lower limits for such care.
  3. Extended bed reservation periods (sometimes even when bed reservation was not included in the policy).
  4. Extended the period for satisfying the elimination period (e.g., 90 days in a 360-day period).
  5. Did not enforce a second elimination period where there was a discontinuation, then resumption, of benefits.
  6. Continued to waive premium for claimants who stopped receiving covered services, contrary to policy provisions.
  7. Used video or telephone for claimant assessments.
  8. Benefit Eligibility Assessments became more varied and customized.
  9. Recertification procedures were loosened, particularly for those not expected to recover, largely because face-to-face recertification was not possible while facilities were closed to outsiders.
  10. Relied more on electronic medical records, even if not as comprehensive as desired.
  11. Repatriated services that had been shipped overseas.
  12. At the same time, insurers were investing in and rolling out software to facilitate the claims process.

a) Added authentication to increase security and permit enhanced transactions.
b) Permitted claimants’ representatives to access and provide information electronically at any time.
c) Smart forms to garner the necessary information while avoiding questions that are irrelevant to the situation.
d) Moved uploaded documents directly to claims processing queues.
e) Created automated follow-ups for claimants to remind them of outstanding requirements and due dates and also automated follow-ups for claims staff to perform various activities.
f) Electronic payment to claimants’ bank accounts.
g) More electronic reporting systems for providers, including electronic visit verification.

Underwriting during the Pandemic
As part of its annual LTCI Survey published in Broker World magazine in the July and August issues, Milliman asked some questions about underwriting practices during the pandemic.

Four of eight insurers indicated a variance in face-to-face interview (F2F) practices, in one or another of the ways documented in Table 1.

Table 1

Two insurers required face-to-face interviews in fewer situations and one of them expects to continue to have fewer face-to-face interview requirements.

Three insurers now hold off on scheduling a face-to-face interview until medical records have been reviewed.

Two insurers did F2F interviews by Zoom and one of them expects to continue to do so post-pandemic. Another insurer indicated that they might consider this change in the future “dependent on reinsurer’s willingness to accept this in place of traditional face-to-face interviews.”

Only one of seven insurers responded that they did personal phone interviews by Zoom. Apparently, as phone interviews were not done face-to-face, modification was not necessary. However, three insurers expect to do such interviews by Zoom in the future.
Three insurers reduced their maximum issue age. We are aware of one stand-alone LTCI carrier which reduced its maximum issue age from 79 to 65 on April 16, 2020, because of difficulties completing face-to-face interviews, but these restrictions were removed in 30 jurisdictions by June 14 and in others as stay-at-home orders were rescinded. One insurer expects the reduction in maximum issue age to continue post-pandemic.
Linked-benefit insurers were more likely than stand-alone long term care insurers to reduce their maximum issue age, not only because of the pandemic but also because of low investment yields. Of the five linked-benefit insurers for which we have information, four cut off sales above age 70 and the fifth discontinued, above age 70, recurring premium, some designs and substandard sales but continued to accept single premiums.
Three of seven carriers ask the applicant whether he/she has had COVID-19 or been in contact with someone who has COVID-19. Based on the comments of the four insurers who reported not asking these questions, it appears that some companies relied on medical records, symptoms, and/or a catch-all “not otherwise disclosed” question to expose having (had) COVID-19. At least two insurers are monitoring the longer-term impact of COVID-19 before deciding whether to refile their applications with COVID-19 (or related) questions.

People who have had COVID-19 are deferred 60 to 180 days depending on the insurer, the CDC’s recommended quarantine period and on hospitalization, severity, residual impact, and potential impact on existing comorbidities. As noted in Table 1, some insurers routinely defer more than 60 days.

Five of seven insurers indicated that having been in contact with someone with COVID-19 will result in deferral. Generally, the contact period and deferral period were the same, either 14 or 30 days. For example, if someone was in contact with a person who had COVID-19 in the past 14 days, they would be deferred for 14 days. One insurer responded that if someone has been in contact, within the past 14 days, with a person who had COVID-19, the application would be deferred for 30 days, noting that the 30 days is measured from recovery.

Three insurers reported different deferral periods for traveling outside the USA: 21 days; 30 days; or 28 days if it was a cruise. Three insurers had no deferral because of COVID-19 concerns over foreign travel.

In addition to the above questions, when asked to look into the impact of the pandemic in the future, one insurer predicted tighter underwriting, one predicted increased prices (five predicted no change in pricing), and one predicted a change in policy design to reflect a shift from facility to home care and care by family members.

Impact on the Future Cost of LTCI
LTCI companies saved money during the pandemic. Clients, particularly in nursing homes, died. Non-claimant insureds who might have become claimants in the near future also died. Claimants and potential claimants vacated facilities, replacing facility claims with generally less-costly home care claims and even less expensive family caregiving. According to a study3 by FitchRatings, the LTCI industry improved from a $2.3 billion loss in 2019 to a $241 million profit in 2020. The factors mentioned in this paragraph contributed to the improved results as well as other factors such as price increases and perhaps less reserve strengthening.

Table 2

As noted above, most insurers do not envision an increase in the unit price of LTCI. However, the impact of COVID-19 on future claims is unknown. Are COVID-19 survivors more vulnerable to needing long term care? Is there a residual cognitive or physical impact? What will be the long-term impact of inability to address chronic or other conditions due to skipped doctors’ and physical therapy appointments, postponed surgery, or psychological and physical reaction to disrupted routines and relationships?
It will also be interesting to see how much “salvage” there is in LTCI policies in the future. Insurer pricing reflects that claimants do not necessarily use their full daily or monthly maximum. To the degree that insurers anticipate such wastage in their pricing, the resultant premium goes down.

As explained below, we anticipate that the cost of care in each major type of venue (nursing home (NH), assisted living facility (ALF), home care (HC)) will increase. Hence, we expect the wastage percentage factor for each venue to reduce.

A lower wastage percentage assumption would result in a small increase in LTCI premiums. However, even with a lower wastage factor for each of the three mentioned venues, the average wastage ratio could rise because of a shift from facility care to home care.

Because the cost of care is likely to increase, consumers may feel a need for a higher LTCI monthly maximum. If the initial maximum monthly benefit is tied to the cost of a nursing home or assisted living facility, applicants will experience higher premiums even if the unit price (e.g., per $10 of initial daily benefit) remains unchanged.

However, that could be offset by applicants who shift how they determine the desired initial maximum monthly benefit. To the degree that they decide an initial monthly maximum that would cover ALF cost instead of NH cost or the likely cost of home care rather than facility care, they may accept more risk in lieu of buying more insurance.
The cost of facility care is likely to increase because facilities may incur higher costs due to physical and procedural modifications as a result of the pandemic and a likely need for a higher staff-to-resident ratio. Furthermore, occupancy rates slumped significantly during the pandemic and people needing rehab avoided facilities. If lower overall occupancy and/or a loss of rehab business continues, facilities seem likely to have to raise prices to cover their overhead costs.

A December 2020 survey of nursing homes1 found that 65 percent were operating at a loss and another 25 percent were operating on a zero to three percent margin. Similarly, a survey2 found that 50 percent of assisted living facilities were operating at a loss, with 13 percent operating at zero to three percent profitability. The post-pandemic recovery will help (reducing overtime for example) but seems unlikely to fully restore their prior financial results. Therefore, facility prices may have to increase, and a significant number of facilities might close. A reduction in the number of facilities would improve the profitability of the remaining facilities but it might also reduce the pressure for competitive pricing.

Home care hourly costs are likely to increase for several reasons. Significantly increased demand will raise the cost of limited supply. Additional costs are for protective equipment similar to masks with a particle filter on them to prevent contagion, or of course, testing and training which could also contribute to higher prices. Other independent factors could also lead to higher prices, such as continuing consolidation and a higher minimum wage.

The ultimate impact of the pandemic won’t be known for a long-time, but it seems likely that there will be direct and indirect impacts. So far, the LTCI industry has weathered the pandemic well, keeping a focus on taking care of its claimants. That story deserves to be told.

References:

  1. Survey by the American Health Care Association and the National Center for Assisted Living, December 2020, https://www.ahcancal.org/News-and-Communications/Fact-Sheets/FactSheets/State-of-Nursing-Home-Industry_Dec2020.pdf.
  2. Survey by the National Center for Assisted Living, August 8-10, 2020, https://www.ahcancal.org/News-and-Communications/Fact-Sheets/FactSheets/Survey-AL-COVID-Costs.pdf.
  3. Jamie Tucker and David Gorak, FitchRatings; found at https://www.thinkadvisor.com/2021/04/07/covid-19-helped-long-term-care-insurers-in-2020-fitch/, which offered a link to https://www.fitchratings.com/research/insurance/long-term-care-insurance-dashboard-2020-improved-results-view-of-reserve-adequacy-unchanged-06-04-2021.

Factoring Employee Benefit Impact Into Future Remote Workforce Plans

After transitioning most of their workforces to operate remotely for the past year, businesses now face the decision of if and when to have employees return to offices. Before jumping full bore into an ongoing remote workforce situation, there are critical factors to be considered when it comes to employee benefits.

Companies recognize that, on the surface, working away from the office has its perks for employees. There are less workplace distractions, such as office drop-ins, impromptu meetings, and office noises, which can make it easier to focus for some people. People have truly appreciated not having to spend large portions of their day commuting. And most have enjoyed an improved work-life balance.

For many people, another perk of all meetings taking place remotely has been the ability to not just work from home, but also relatives’ homes, favorite vacation spots, or even another country, so long as there was strong dependable internet.  Some workers have gone so far as to make those favorite vacation spots a new home.  Employers, eager to ensure continued productivity and retain valuable employees, have rushed in to support working away from the office making it easier than ever before to be productive from anywhere.

The elephant in the room now that employers are considering when, how, and if to bring employees back to the office is how do employee benefits (a key component to attracting and retaining employees) function in this new work-from-anywhere world? In 2020 many employers experience a decrease in employee benefit costs. The main factor in this was the fact that many people delayed and avoided health screenings and procedures during the pandemic. According to a survey by Aon, the average decrease in employer healthcare costs in 2020 was five percent, and a two percent average increase is expected in 2021. This increase in costs this year is being attributed to both the cost of care for COVID and people catching up on care that was skipped last year.

Any company that plans to allow workers to truly work from anywhere moving forward should focus on ensuring their benefits programs address:

Physical and Virtual Access
Before your company embraces working from anywhere, carefully consider the complexities and nuances of giving employees free rein of working from the environment of their choosing, without managing their expectations of significant challenges in the benefits your company offers. Benefits are sometimes limited or even very restricted by geography.  As an example, if Kaiser is a company’s primary medical plan, moving to a location outside of where Kaiser is offered leaves an employee with no or very limited medical coverage.  Under a PPO plan, a less densely populated area may have a very limited network, or perhaps out of network only coverage, exposing both the employer and employee to significantly increased claims costs. Telehealth services can help bridge the coverage cap in some situations. Rather than paying increased costs to see an out-of-network care provider in-person, an employee working remotely could get sufficient care and diagnosis via a video call with a physician who can phone in a prescription. Another change to be considered is that disability may function entirely differently from state to state due to state-mandated disability coverage. Also, there may be more simple limits to the benefits program like participation in the company wellness program, health fairs, or flu vaccines offered on-site. Understanding these limits and communicating these clearly to the employee who is looking to relocate is extremely important to managing employee expectations and ultimately job satisfaction.  Employees need to feel like their work cares for their well-being, and employers need to ensure that they are doing the right thing for their employees, this is why factoring in job management software that can oversee and streamline systems is a fundamental part of helping employees with their working environment.

Effective Communication Methods
Technology-aided attention deficit disorder was here well before COVID, but now it attacks with a sweeping vengeance. Video conference call upon video conference call produces attention fatigue. Most people are guilty of answering emails and texts on these calls while pretending to pay attention. Scientists have provided much data over the years that prove multitasking and lack of focus limit the ability for best thinking outcomes and reduce productivity. But most people charge on, ignoring this advice and doing as much at once as possible. Employers must cut through all of this noise and communicate and develop an understanding of their programs in a fresh and concise manner, beyond just the obvious of conducting all this virtually. What has been successful this past year is shorter, more frequent messaging. Keep presentations and video training shorter in duration, 20 minutes or less, preferably 10 minutes. Also, do remember cybersecurity is critical during remote working. Employees should be provided the best vpn for mac or their specific computers. Provide a higher frequency of communication to reinforce key concepts and messaging and be creative. While it will require a different type of planning, it is possible to host virtual health fairs during open enrollment with exercise, and cooking classes, while peppering in benefits education. Making use of Online Conference Management software and tools can aid well in hosting a successful interactive educational program.

Varying Regional Nuances
Unfortunately, there are a lot of differences between states in not just taxes, but also required benefits.  State short-term disability is a common difference where some states require employers to provide this and regulate how it is to be provided.  If an employee moves to one of these states, like New York or California, an employer will be required to provide the appropriate disability coverage.  The statutory disability coverage can also impact any benefits under disability the employee may currently be enrolled in.  Some states do not allow for the tax-deductibility of HSA plans, which can be a bit of a shock for an employee who has relied on these for tax savings and any tax-free employer contributions.  In a place like Hawaii, benefit coverage, employee contributions, and plan design are regulated, requiring employers to provide coverage to even part-time employees. For employers new to a geographically diverse workforce, knowing, understanding and executing a wide variety of benefit plans can be overwhelming and it is a maze that must be planned for in advance before giving employees the green light to pack their bags and relocate.

Embracing Technology
For the few companies who have not embraced technology for enrolling employees in benefits and managing changes to plans, now is the time to just do it. Too long employers have assumed that not every employee will have adequate enough technology access to use the HRIS/Benefits Administration system, but almost every employee does now with the advances that have been made in mobile technology.  For companies that already use an HRIS/Benefits Administration system now is the time to re-examine just how efficient and user-friendly the benefits administration system is.  With the complicated virtual world now, and competing priorities, a company’s benefits administration system needs to be clear and easy for employees to understand and use.  With the enhancements and improvement of UX (user experience), consider making this tool a magnet for employees as a place to go for learning and development, company community, and company values and culture.  Leaning on these tools to fill in the natural office culture and sense of community that occurs when everyone is together in a workplace, but is lacking when employees work from anywhere, has never been more important.

Impact on Attracting and Retaining Employees
According to a recent report by McKinsey & Company (April 1, 2021), most employers have not clearly communicated their plans for post-pandemic work. This is making employees anxious, as 47 percent of employees surveyed feel lack of clear vision about post-pandemic work is a cause for concern. Most employees prefer a hybrid work model when returning to work, wanting more flexibility.

If employers are not proactive in communicating their plans to employees now there is a risk of losing key individuals to other companies who have been clear about allowing for remote work or a hybrid working arrangement. Not defining, implementing and communicating a return-to-work strategy could be very costly to businesses right now, as we all are seeing the economy begin to return to normal.

Managing the many complications and nuances of benefits that work from anywhere can be overwhelming. Slow down and take the process step-by-step and consider how, in the long run, embracing the virtual workplace can result in a more productive, engaged and happy workforce than was ever possible within the confines of an office-but do not forget to weigh the impact this will have on a benefits program.

COVID-19 Response: Agility, Collaboration, And Engagement

T.S. Eliot once said that “Last year’s words belong to last year’s language. And next year’s words await another voice.” That’s very beautiful and poetic, but little did we know that 2020’s voice would be heard through a mask.

December 2019 seems like such a long time ago. Like most other companies, American National was looking back on the accomplishments from the prior year and looking forward to ambitious plans made for 2020. I recall leaving the office on the last workday of 2019 with a two-sided whiteboard full of goals and plans for the next year. Things were exciting. Research and various pilots were being conducted. New opportunities were to be explored with ambitious and hopeful plans attached to each. The first few weeks of 2020 weren’t much different than the early parts of previous years. There were, to be sure, some vague stories about a viral illness in China, but like most, it wasn’t really on my radar.

That all changed on January 17, 2020. I was traveling back from an industry meeting in California when a family member called me and said that the CDC had started some health screening at a few American airports due to the virus that had originated in China. Four days later, the CDC announced the first U.S. case of COVID-19. This was followed by news of lockdowns in Wuhan, China. By January 30 the World Health Organization had declared a global health emergency. This was followed by lockdowns, travel restrictions, national emergency, the “15 days to slow the spread” effort, masks, social distancing, businesses closing, and rising unemployment.

By March 2020 we were hearing of difficulties in obtaining paramedical exams. Something had to be done if we were going to keep the flow of business continuing. In addition, we had the additional task of attempting to mitigate the risk of this new virus when still very little was known. American National’s corporate culture stresses the importance of agility, collaboration, and engagement (we refer to it as ACE culture). All of this was about to be put to the test. Underwriting, Actuarial, IT, Marketing, the Medical Director’s Office, and senior management would be tasked to change how we do business in a very short period of time.

To keep the business flowing, we adjusted our accelerated underwriting programs (Xpress and Xpress Plus underwriting). We decided that since the COVID-19 risk seemed to be less impactful in younger ages and those with no chronic health conditions, we expanded our acceleration rate on clients age 50 and under who didn’t have chronic health issues. This allowed for more cases to be approved and issued without traditional medical exams. This was accomplished by taking many proofs of concepts efforts that were in a pilot or research stage and putting them into production.

In late 2019 we had embarked on a pilot to determine the effectiveness of utilizing a secondary prescription history provider. By March 2020 we had compiled results that were impressive. We had found that by reflexively ordering data from the second provider after inadequate data was provided from the first, our meaningful hit rate substantially increased. The results came at a perfect time. Increasing our acceleration rates in response to COVID-19 required more robust real-time medical data. By enhancing our prescription history data, we were able to improve our understanding of the risk which, in turn, improved our ability to provide a non-medically examined underwriting path.

Prior to COVID-19 we had been utilizing real-time clinical lab data on an as-needed, underwriter-discretion basis. This is a tool that allows us to check for lab and other medical data that has been conducted by a couple of the nation’s largest private labs. In our effort to enhance the accelerated underwriting rates, we made this process part of our normal accelerated underwriting rules. We also eventually added medical claims and Electronic Health Records to our underwriting tool belt in the months that followed.

These efforts all helped push up our acceleration rates for those aged 50 and under, but we also had to take action to reduce the risk the virus posed at older ages, impaired risks, and foreign travel risks. Like many companies, we added underwriting restrictions to help reduce the risks of those uncertainties.

To communicate and explain these changes, the underwriting department worked closely with our marketing partners. We met regularly (in virtual meetings, of course) with marketing to explain the various changes and the reasons behind them so that they could also communicate these changes to our agency partners. In April 2020 underwriting and marketing held a joint webinar on this topic with over 1,000 in attendance. It was our highest attended webinar to date.

In July we were hit with another blow. A key industry vendor that provided paramedical exams and APS services abruptly closed shop. Another pivot was required. All hands were on deck as we shifted to other existing vendors and eventually added new service providers. This was no small effort. New vendors require new contracts with legal review, new security reviews, new training for staff, as well as extensive IT work to create new connections with new vendors. Agility, collaboration, and engagement were the name of the game once again.

Throughout the remainder of the year we were in constant review mode as the data was monitored closely. Internal data as well as data involving the virus itself. The underwriting staff worked harder than ever as many of these new processes put in place required manual workarounds. While the speed to approval increased, the amount of work required of the underwriter increased. Slowly but surely we began automating some of these new processes, but the bottom line is that our underwriting staff stepped up and made it happen.

And here we are. It’s been more than one year since COVID-19 changed everything. There seems to be light at the end of the tunnel with quite a bit of encouraging news, especially with the rollout of efficient vaccines. However, it is still too soon to tell where all this leads. What is the impact of long-COVID? What about the variants and their impact on the future efficiency of the vaccines? Time will tell.

One thing is for sure, the world of underwriting will never be the same. The use of alternative digital health data is here to stay. Proper implementation of this data is key, not only to meet mortality expectations to keep life insurance rates affordable, but also to improve client experience. Another thing that is here to stay is the paramedical exam. That is not a bad thing. The paramedical exam has been crucial in keeping the cost of insurance down. The exam and accompanying labs are outstanding tools to predict risk and, therefore, are second to none in providing information that allows the industry to appropriately underwrite risks. Contrary to popular opinion, the exam and labs are not as consumer unfriendly as they are made out to be. The industry gets very excited about finding ways to partner with our insured clients in improving their health. We get downright passionate about the prospect of helping our customers improve their lifestyle using new technology. But, what better way is there to help improve the health awareness of our clients than to provide them with a comprehensive blood and urine panel that provides a close look into their health status—markers for diabetes, kidney disease, liver disease, lipid control, etc.? Providing this information along with keys to help them improve their health based on the results is something we at American National are already doing.

That two-sided whiteboard that was full of plans and ideas for 2020 still sits in my office. I occasionally go into the office and just can’t bring myself to wipe it clean and start over. It seems to represent a time past. Maybe it even represents a bit of hubris. One virus changed all those plans. However, it also represents the idea of continuous improvement. You can’t predict everything, but it is the human spirit to keep moving on. The goals and plans for 2021 are different, but perhaps a bit wiser because they are seasoned with an experience from 2020 that taught us how much can be accomplished even when circumstances send us down a different path. I’ll be keeping those plans and goals on a spreadsheet this time.

606 Kids And Adults Receive Free Eye Exams And Glasses

Preventative care visits have dropped significantly over the course of the pandemic, and this is especially true in under-served communities. That’s why the Anthem Blue Cross and Blue Shield Foundation teamed up with OneSight, a leading global vision care nonprofit, to provide free eye exams and glasses to kids and adults throughout Cincinnati.

Free vision care was provided to 606 Kids and adults in the area from March 8 through March 26 at five locations across the Greater Cincinnati area. Out of the patients seen, 93 percent needed glasses.

“The ability to see clearly is essential and when students get the glasses they need it can help them learn up to twice as much. When not diagnosed and corrected with lenses, vision problems can lead to eye fatigue, discomfort and headaches and in children it can also lead to developmental delays, eye-hand coordination problems and their literacy skills may lag,” said Barry Malinowski, M.D., medical director for Anthem Blue Cross and Blue Shield in Ohio. “Anthem Blue Cross and Blue Shield and the Foundation are committed to improving the health and wellness of communities across the country and that’s why this partnership with OneSight was so important to us because it allowed us to provide quality vision care and eyewear to those who need it most.”

In the United States, 25 percent of students have an undiagnosed vision problem. For some, the issue has been unrecognized due in part to a lack of access to vision care and affordability, two significant barriers that exist for children in vulnerable communities. For adults, clear sight enables them to find, commute to, and perform better at their jobs, increasing their productivity and empowering them to earn more per year.

It is very important that you take the time to schedule an eye exam as often as you need to, as having good sight is imperative to your lives. There are many great optometry practices that you will be able to find in your area, most of whom use something like this consulting experience (https://www.pecaa.com/optometry-consulting/) that can help to ensure that the practice is performing to the highest standard at all times. This is something that you should look into when it comes to the health of your eyes, so be sure to choose a clinic that is right for you.

Funded by a charitable grant from the Anthem Blue Cross and Blue Shield Foundation, OneSight operated clinics for three weeks in March to help address these unresolved vision care needs for those in Cincinnati who may otherwise lack access.

The event included a mobile, state-of-the-art van equipped with a vision center and optical lab, and a stationary vision clinic. Leveraging OneSight’s proven clinic model and manufacturing capabilities, most participants in need of glasses received their newly prescribed eyewear on-site.

“Clear vision unleashes potential-improving long-term educational, professional and social prospects,” said K-T Overbey, president and executive director at OneSight. “Thanks to our generous partner, the Anthem Blue Cross and Blue Shield Foundation, we were able to make a tremendous impact in Cincinnati. Enabling access to vision correction improves quality of life, especially for individuals in need.”

Locally, OneSight partnered with UpSpring, Su Casa, The Care Center, Northstar Community, Urban League, City Gospel Mission, Cincinnati Union Bethel, and Strategies to End Homelessness, to serve Cincinnati kids and adults in need of vision correction.

According to a study by OneSight and Deloitte, there are more than 1 billion people globally who need glasses, but don’t have access to get them. Studies show that clear sight can dramatically impact learning in children, job performance and earning potential.

To learn more about OneSight, their mission, and vision care, visit www.onesight.org.

To learn more about the Anthem Blue Cross and Blue Shield Foundation, please visit www.anthem.foundation.

An interview With Eugene Cohen—The “No Hurry” And “No Confidence” Objections

2009 Honoree International DI Society’s
W. Harold Petersen Lifetime Achievement Award.


2015 Honoree of NAILBA’s
Douglas Mooers Award for Excellence.

From time to time we will feature an interview with Eugene Cohen, who has dedicated over 57 years of his life to learning, teaching, and supporting brokers in the agency’s quest to help consumers protect their incomes from the tragic effects of a disability. With the help of Victor Cohen, we will chronicle many of Eugene’s life lessons, advice, strategies, and what drives him every day to mentor those who wish to help their clients protect their incomes. Disability insurance is one of those products that can change the trajectory of an individual’s and a family’s life and is crucial for every financial planner and insurance professional to learn about and offer to clients.

This is the fourth part of our ongoing series with Eugene Cohen, CEO and founder of the Eugene Cohen Insurance Agency, Inc. The agency started as a disability insurance brokerage MGA and has grown to over 35 team members who are all focused on the wholesale service needs of financial professionals for disability, life, long term care, and annuities.

Victor: Over our past conversations (published in Broker World’s November 2020, January 2021, and March 2021 issues) you have shared the four types of objections you’ve identified that an advisor may face when discussing individual disability insurance with a client.

Eugene: Those objections being: No Need, No Money, No Hurry, and No Confidence. If a client is hesitant to apply for an individual disability insurance policy I ask myself, “What is the real objection?” “Which one of these four objections am I looking at?”

Victor: Well, let’s focus on just the “no hurry” objection right now. How would you handle that one?

Eugene: If it’s a “no hurry” objection, I have to help the client understand that there is a hurry, because health can change. Accidents take place. We never plan an accident. They happen.

We see accidents and illnesses happening all of the time. Look at Tiger Woods. Did Tiger Woods plan on getting in a serious car accident in California? Or Christopher Reeve, the actor who played Superman–did he plan on getting in a horse-riding accident? Look at actor Michael J. Fox who has Parkinson’s Disease. He first began noticing symptoms of young-onset Parkinson’s Disease at 29 years old. This is life. It is unpredictable. Sometimes an advisor may need to gently remind the client of this reality.

I suggest all advisors visit the website lifehappens.org to read the real-life stories of a doctor, an attorney, a financial planner, business owners…people whose financial lives would have been virtually destroyed had they not had a disability insurance policy when the unexpected happened. These stories are meant to be shared. They need to be heard.

If something does happen, I always say that having an individual disability insurance policy is like having a parachute. It’s always better to have it and not need it…than to need it and not have it.

I don’t have a crystal ball. I don’t know how long a client can wait. And neither does the client. We are offering a product that the client needs now. An individual disability insurance policy is not a luxury item like a piece of jewelry.

Victor: I remember you saying in one of our previous conversations that when the client sees the need for disability insurance, all of the other objections, like the “no hurry” objection, diminish.

Eugene: Exactly. I always say, “Need motivates action.” And the advisor can help a client see the need by asking questions. Victor, what is the longest vacation you’ve ever taken?

Victor: Maybe two or three weeks.

Eugene: Why not longer?

Victor: I need to work.

Eugene: Okay. So, let’s suppose you were out of work for two, three, or four years. You’d have an income problem, right?

Victor: Yes. I would.

Eugene: All of your obligations, the basics—food, clothes, shelter—would not be covered. If you were unable to work for too long your savings could disappear. Your retirement funds could disappear. If you own a home, you could be at risk of losing it because of a mortgage foreclosure. Do you see why it’s so important to protect that income?

Victor: Definitely. I do.

Eugene: We are asset protectors. For most people the ability to earn an income is their greatest asset. When you apply for a mortgage, what’s the most important question on the application?

Victor: They want to know about your income.

Eugene: Right. How about when you want to buy or lease a car?

Victor: Income.

Eugene: You got it.

Victor: So, let’s say the advisor has done their presentation. The client has expressed interest in applying for DI. They understand the need…but they tell the advisor, “I want to think about it.” So, we’re back to the “no hurry” objection.

Eugene: Well, if a client says they want to think about applying for a policy after they’ve already expressed interest in getting coverage, you could ask them, “What exactly do you want to think about it?” Perhaps there is a question I can answer.

Or perhaps you ask the client, “How long do you want to think about it?” They may give you a time frame. I may then say, “Why don’t we do this. You need more than money to buy this policy. We have to see if the company would even accept you. Why don’t we go through with the application and medical exam (if required by the underwriter) and get everything done. If the policy comes down and is approved, we can go over it again. You have said you need the policy, so let’s first see if we can get it for you. How does that sound?”

Victor: What if the client says, “I would like to go over it with my spouse.”

Eugene: Then perhaps I may say, “Why don’t we get the application submitted, get it approved if we can, and then I will go over the policy with both of you so both understand everything on the policy.”

Victor: Underwriting of a policy can take some time, right?

Eugene: Depending on the client’s health and how much information is needed by the underwriters, yes. Because we are talking about protecting many clients’ most valuable asset, I suggest the client get the process started as soon as possible.

Victor: Before we wrap up today’s conversation, I’d really appreciate hearing your thoughts on the “no confidence” objection.

Eugene: The client has to have confidence in the advisor. The client will be potentially spending thousands of dollars on this product over the years.

And how does an advisor gain the confidence of their client? By the advisor showing their knowledge of the product. As the saying goes, “Knowledge is power.”

Victor: I think there may be a belief among some advisors that they have to be a disability insurance expert to discuss the product with clients.

Eugene: I always say that if you prepare for the appointment by reading the illustration and going over the product brochure before the appointment, you will find that it is very easy to understand and present to a client.

A great way to get familiar with disability insurance–to gain perhaps the best product knowledge–is for the advisor to buy a disability income protection policy to protect his or her own income. Some companies even offer discounts for producers.

The first thing I did when I opened up my own agency years ago was purchase additional DI coverage. Besides increasing my individual disability insurance, I purchased a disability business overhead expense policy to cover my office rent. I had a five-year lease. And nowhere in that lease did it say I didn’t have to pay my monthly rent if I were sick or injured and couldn’t work. I was in a hurry to get that disability policy. I saw the need.

Victor: Thank you again for so generously sharing your experience and passion supporting advisors help their clients protect their incomes. I look forward to our next conversation!

Eugene: Thank you, Victor.

Smoked Brisket, Google And Reading Your Clients’ Minds

During the peak of the COVID-19 pandemic where we were all looking for new things to do with our families, I decided to pick up another hobby—barbeque. Not just barbeque, but barbeque of the smoked variety such as smoked brisket, smoked ribs, smoked chicken, etc. I have always loved my Weber grill but that did not do what I was seeking to accomplish—smoke. Eventually I suggested to my wife that we purchase a smoker, and smokers are usually not cheap! My wife, being fairly frugal, took some convincing, but she finally agreed and we got the smoker. Today I am probably 10 pounds heavier as a result!

What is my point? My point is, by the time my recommendation was verbalized to my wife that we were in dire need of a new $1,200 smoker, do you think there was any footprint at all of my interest in smokers? Were there any leading indicators? You guessed it, yes. That “leading indicator” was Google.

If my wife could have gotten into my phone to check my previous Google search terms, she would have known that I was conspiring to buy a smoker for probably two to three months prior to actually asking for her permission. Do I feel guilty about this? No. For two reasons: 1. I did ultimately ask her for permission after all. 2. Husbands across the country were doing the same thing that I was. How do I know? Check out Chart 1.

Chart 1

What this shows you is the search term’s relative popularity over time. This is a “Google Query” that shows you how popular the search term “Best Smokers” was over a time of your choosing. Obviously, I queried “best smoker” for the above data because that is exactly what I googled when I was educating myself on which ones to buy. In this query I chose five years as the period. My pencil circle on the left is June of 2020 and my circle on the right is November 2020 (Christmas shopping). The way the relative importance works is that the peak is set at 100 percent and anything lower than the peak is a percentage of that. Of course, the peak represents the highest point in time where people—including me—were “googling” the search term “Best Smoker.” You can see that the troughs over time are merely 25 percent or so of where the peak was back in June and November of 2020. The pandemic multiplied demand for smokers…

By me laying all of this out, you likely realize that this article is not about how popular smokers are. Rather, it’s about the information that is at your fingertips that is powerful! And if you are as savvy as the Broker World readership usually is, you are asking yourself questions like:

  • How do I get access to this query?
  • What financial/insurance search terms are popular in the queries?
  • How do I leverage the information I gather from the queries?
  • What smoker did Charlie buy that was supposedly “the best”?

Google Statistics
To say that Google has major influence over what we see, how we buy, etc. is a major understatement. Because everybody uses Google and relies on the information that Google leads us to, this entity is one of the most influential entities on Earth—whether good or bad. There is no search engine that compares to Google. For years they have had 90 percent plus market share of all searches in the United States. The next competitor is Bing with around six percent market share. Google conducts 3.5 billion searches a day (yes, billion!). Eighty-four percent of survey respondents say that they use Google three-plus times a day.

A lot like how economists track store traffic in brick and mortar stores every year to gauge how the economy will fare, that is exactly what Google does except on a more comprehensive basis. Google tracks not just one store or one industry, their queries track everything. Most importantly, Google tracks what consumers look for while the consumers are in private—like what I did with my grill. And Google having this kind of a snapshot into the brains of consumers is pure and unadulterated information that a company—whether in financial services or not—can leverage.

Where do I get access to this query?
www.Trends.google.com is where you can query and compare what consumers are searching for. You can query by time frame, query by region, drill down into subtopics and also run a query that compares certain search terms with others.

What financial/insurance search terms are popular?
I will give you the bad news and the good news.

Bad News: Relative to pop culture topics like movie stars and singers, there is not anything that I have found in financial services that compares. Take my example (shown in Chart 2) of the relative importance over time (since 2004) between “The Rock” and “Life Insurance.” “The Rock” is in the red and “Life Insurance” is in the blue. This means that there are more people googling The Rock than life insurance. Although I do like Dwayne “The Rock” Johnson, I think this is kind of a sad statement about our priorities.

Chart 2

Good News: If you were to zoom into the “Life Insurance” line—as I do (see Chart 3)—you will find that we have not been “googled” this much since 2007. This is a positive leading indicator!

Chart 3

I believe the heightened interest in life insurance is because of COVID-19 bringing a lot of folks to grips with their possible mortality. This heightened interest is not new news as it is supported by industry studies.


As far as life insurance versus other industry topics, let’s make a comparison query. In (Chart 4) I compared the relative popularity across five different terms: 1. Life Insurance; 2. Annuities; 3. IRA; Long Term Care; 5. Bank CD.

Chart 4

All lines are basically irrelevant except for the blue and the yellow. The blue line is “Life Insurance” and the yellow line is “IRA.” The other lines way down at the bottom—that all blend in and are hard to read—are “Annuities,” “Long Term Care” and “Bank CD.” The volatility in the yellow IRA line is interesting. Every year around tax time (April) the search term of “IRA” is heavily googled.

What is the most searched keyword of all of them on Google? Hint: It’s not “Life Insurance.” It is “Facebook.”

How do I leverage the information I gather from the queries?
Here is a list of items that my company (CG Financial Group) implements with our financial professionals based off findings like the above, and thus what I would suggest:

  1. If you do not sell life insurance, definitely consider it because that is clearly “top of mind,” at least relative to the other topics we deal with in financial services. Don’t know much about life insurance? Plug yourself—or your reps—into a training platform that your IMO may have. Or, check out www.retirement-academy.com that launched April 5. That is my online training platform that some agencies have outsourced their training to.
  2. Regarding life insurance: Although not shown, I further drilled down into the terms related to life insurance that are most searched. “Term Life Insurance” and “Whole Life Insurance” are among the top. Do you offer these? Also note that various questions like “Is life insurance tax-free?” are googled a lot! Do you discuss the tax-free potential of life insurance?
  3. Do you have a website?
  4. Does your website have the above-mentioned terms so Google can recognize that your site is a site it should direct its searchers to? That is called “search engine optimization.”
  5. Does your website have a term insurance quote engine? Studies show that consumers start their life insurance journeys online. Furthermore, studies are also showing that consumers are now becoming more comfortable with actually purchasing life insurance online.
  6. Do you sell annuities that can also be IRAs? If you sell annuities, then you certainly do have the capability of selling IRAs. Do you market this capability that you have? Don’t assume that if consumers know you sell annuities that they also know that those annuities can be IRAs!
  7. Do you have a Facebook business page? Three billion people worldwide use Facebook and so should you. Plus, it’s free.
  8. Make sure you are working with an IMO that helps you with all the above.

What smoker did Charlie buy that was supposedly the best?

What I finally purchased was a Reqtec 700. Sorry Traeger fans!

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