Churchill

“The end of the beginning,”—Winston Churchill

After the Luftwaffe had thrown all its hatred of free thinking against an indomitable British spirit there were voices of derision and submission to the overwhelming perception of decimation and potential failure. Winston made it crystal clear. It was not the beginning of the end, it was the end of the beginning. I promise I will only tie a ribbon on this once. The optimism of this column is at this point legendary. We have all worked with the materials that were available at the time. I do not believe that anyone would claim comprehensive market success. Even conservatively we have been reaching for 25 to 35 percent as a definition of market success. Depending on how you hold the numbers up to the light we are at seven to 10 percent and currently 17 million Americans do hold some form of insured protection against the onslaught of financially devastating custodial care. It is also necessary to argue that this frequently tossed around market penetration data is inherently flawed. It can be argued, for example, mid-west markets where fear of losing the farm is crystal clear in the majority of minds has greater sales numbers. Geographic enclaves where education and economic success flourish statistically may also have higher numbers of sales success. The market has always had its goldilocks boundaries excluding those who have the privilege to prefer to self-fund and not counting those where government dependence will ultimately be the only alternative .

At the absolute heart of any retroactive conversation must be acknowledgement on an entrenched affordability component. The price of this problem is the issue .Our greatest sales success 20 to 25 years ago was driven by premium cost, both individual and group, that was frankly “doable.” As the market matured excessive medical inflation, still growing at a projected five to six percent, unprecedented love of the ownership of those who did buy and the inevitable overly aggressive benefit battles have brought us all full circle:

  • After paying many millions in claims we do know what will happen and when and what the cost looks like in great minutia.
  • We are simply not alone. The earth is suffering a deficit of adequate care for an aging population. The first to take to the streets in Russia, Turkey or France are the pensioners on a fixed income. Reducing Medicare and Medicaid is political suicide in America and no one goes willingly to a Nursing Home.
  • The solution has always been a combination of public and private solutions. You will receive care, period. The only open question remains the same—”What will be the quality and degree of control you will have of that care?” This is the firm ground we stand on every time we ask the ultimate ice breaker—“What are your plans to handle the cost of long term care?”
  • We simply have to accept the reality of the cost of our growing pains. We speculated on a future that materialized much differently than projected. There is not an experienced insurance professional who does understand the trajectory of new health product. Even though we did take aim at the issue as early as 40-50 years ago, the solidification of structure from HIPAA and NAIC Model Regulations gave us a clear track to run on and initially we did. We all knew or at least may have suspected that we were underpriced with very limited clam information. If pressed we might also have worried that a virgin health product might ultimately create reserve drains. Within 24 months of the advent of TQ products, companies flooded into the market. All would not survive, We underpriced and surprise (not) claims spiked in unanticipated locations, persistency exceeded all expectations, new premiums coming in the front door began to diminish, Regulatory authorities were less than cooperative with needed premium increases. Like the perfect storm, fronts were moving in from multiple directions.
  • It can be argued that as new premium increases also began to grow we unintentionally abandoned the market that had given us the best success. The middle class, particularly its upwardly mobile components, found itself priced out of the party. Those most exposed to the risk. Those who could run out of money watched the ship sail out to sea without them.
  • And finally, insult to injury, onerous rate increases got on everyone’s boots.

I have spent 20 years in this column expressing my belief in a sure and certain path forward.

I’ll let Winston sum it up: “The pessimist sees difficulty in every opportunity .The optimist sees the opportunity in every difficulty.“

Other than that I have no opinion on the subject.

Ronald R. Hagelman, CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products.

A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing “friend” of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman and his partner Barry J. Fisher are principles of Ice Floe Consulting, providing consulting services for Chronic Illness/LTC product development and brokerage distribution strategies.

Hagelman can be reached at Ice Floe Consulting, 156 N. Solms Rd., New Braunfels, TX 78132 Telephone: 830-620-4066. Email: [email protected].