“For myself I am an optimist—it does not seem to be much use to be anything else.” —Winston S. Churchill
Optimism is a blessing and a curse. It can keep one going when the going gets tough, or it can keep us in the game well past our “sell-by date.”
For the past five years we’ve been following the trail of an elusive creature: A credible and affordable long term care insurance solution for the middle market. During this time we’ve written about addressing the needs of a vast population that is underserved. We’ve worked with several insurance companies in the effort to create a life insurance combo offering that appeals to a broad cross-section of agents, advisors and consumers. While there has been progress, it’s been excruciatingly slow with many fits and starts along the way.
Regardless, in the spirit of two adventurous optimists, we’d like to share what we’ve learned about how the life/long term care insurance industry might proceed in their stated desire to create mid-market solutions. The good news is, we’ve recently seen some insurance companies re-tool their 101(g) chronic illness riders to make the benefits more meaningful to consumers, which we’ve been advocating for the past five years. We’ve also seen efforts to create more affordable policies with guarantees and a simple application process.
In our recent efforts, several issues pertaining to a mid-market combo offering came into clear focus:
- While combo sales have seen significant growth over the past five years, the number of Americans purchasing any option to leverage the extended-care risk has remained static.
- Many acknowledge that expanded market growth can best be accomplished by developing a supplemental sales strategy that appeals to the upper end of the middle market. This will help guarantee private care for those most at risk of spending down their assets.
- We believe a guaranteed-premium life insurance policy that provides clear and certain chronic illness benefits would best suit the middle-market supplemental sales approach. By combining the most current IRC Section 101(g) accelerated death benefit rider (ADBR) definitions for benefit qualification, with a streamlined underwriting process, we believe expanded sales growth and market penetration can be accomplished.
- Also, future product enhancements must consider potential changes in care delivery and generational consumer preferences about where they wish to receive care. Technology will be a game-changer and policy design must keep pace to prevent the insurance from becoming irrelevant.
- In the short-run, IRC Section 101(g) ADBRs are best suited to accommodate future preferences in care delivery due to the required “cash” nature of the benefit payment.
- Effective penetration of the middle market will require advisor education and field training, focused on the value of the supplemental approach to extended-care planning. In order to accomplish this mission, a deeper understanding of what’s currently working (or not) in the field is imperative.
- We have proposed research into how advisors are currently positioning extended-care solutions for consumers in order to understand the end-to-end sales processes utilized in the field.
- We need to:
- Answer the question, “Who’s selling what to whom and how?” for better sales strategies;
- Have a deeper understanding of various distribution channels to understand and expand market penetration;
- Create best practices for advisors, particularly as it relates to their growing fiduciary responsibilities;
- Recognize that unique distribution channels influence the conversations advisors have with consumers. Understanding these factors will assist in fine-tuning sales and training strategies; and,
- Develop new advisor training based on findings from the above-described research.
Refreshed and informed data gathered from successful producer behavior can lead to new opportunities for more precise training of current and future advisors. For instance, in a recent project we learned that live sales training is still more effective than web based. Over the past few years web training has become ubiquitous and increasingly ineffective.
A great deal of work needs to be done if we’re going to effectively serve the upper end of the middle market. Getting the product right is an important, but far from the only, requirement. Fulfilling the needs of this long-forgotten population cohort will require answers and new innovations. For instance:
- How do we educate mid-market consumers that private insurance provides better choices than relying on Medicaid as their primary fallback?
- How do we get back the hundreds of agents who sold long term care insurance in the early 2000s but now don’t have the conversation with clients? How do we appeal to younger financial service professionals who are not being trained in extended-care planning?
- Can an effective direct-to-consumer approach be created to expand the market for extended care solutions?
- Are there insurance companies willing to spend the time and resources necessary for success in the mid-market? Wrestling with the competition over the affluent market will only go so far in solving the looming financial crisis that will be faced by many mid-market consumers.
One thought that has crossed our minds is that the mid-market may indeed be a mythical creature. Optimism is no substitute for realism in this quest to expand sales to an increasingly affluent portion of our population and one that has unrecognized and unfulfilled long term care planning needs. We need to rethink some basic questions about who the customers are, what they want, and how we can best fulfill their desires.
The old saying “It ain’t dog food if the dogs won’t eat it” is often ignored when sitting around the product design drawing board. In this case our customers include agents, advisors and the buying public, and they all want something tasty.
These are just some of the challenges we face in chasing down the unicorn of mid-market extended-care planning. To us optimists, it means we have many opportunities in a target-rich environment. We will keep you posted on our ongoing adventures.
