Recently an industry publication offered a headline that even State Regulators were confused about regarding chronic illness combo/hybrid policy offerings. That same confusion is rampant through the ranks of all concerned. As has been suggested previously in this column, there is little if any consensus on the balance of pricing assumptions. We do seem to have come to understand that mortality and morbidity are both at play in one financial instrument. Some early SPWL product with limited chronic illness riders were based solely on mortality. Furthermore, it is accepted that premium, underwriting and administration expenses must be considered for either contingency. The persistent low interest environment has seemed to help point the market in the direction of the intrinsic value of whole life promises guaranteeing premium and predictable benefit.

No company wants to go into battle with a sword but no shield. Unfortunately some of the shields look good from a distance but are made of very soft wood. Caution is necessary when suiting up. Insurance distribution is often a little sloppy in their use of popular terminology. Chronic illness riders do not pay long term care benefits! All so-called living benefit riders are not created equal. The only way to be less confused is to educate yourself as to what the rider pays, and where and when. Are there any limitations of benefit—specifically as to location of care or how the money can be spent? The confusion as to product structure will not clear up any time soon, but if we keep asking the right questions our expectations as to what we need to offer our clients and the reality of what is available can improve dramatically.

The opposite of confusion is structural clarity. Recent consumer surveys have again confirmed the size and shape of the risk itself. This sale begins and ends with an understanding of caregiving. The most definitive analysis of the problem that creates the incentive to buy was just released by The Associated Press NORC Center for Public Affairs and funded by the SCANN Foundation: “Long-Term CareGIving: The True Cost of Caring For Aging Adults.” We will never succeed without a clear perception of the reality of the problem:

  • 40 percent of Americans have current and direct experience with providing long term care to an older family member or friend.
  • The survey confirmed that those helping with care significantly endangered their own health. Thirty-nine percent had a health condition of their own and 40 percent indicated that caregiving limited their ability to deal with their own health problems.
  • The majority of caregivers see their support efforts as defining who they are, making caregiving an “essential” component of their personal identity.
  • Dealing with the additional stress also becomes a significant part of their lives, with 63 percent turning to prayer and meditation. Unhealthy behavior rises as well— they lose sleep, avoid seeking help themselves, and increase their use of alcohol.
  • Surprisingly those caregivers under 40 were impacted the most with 74 percent reporting feelings of loneliness.
  • Ninety percent accompany those they care for to doctor appointments and 70 percent follow them into the exam itself. Clearly they understand the problem and the progression of disability.
  • They are intimately involved, with 45 percent of caregivers have a legal document giving them authority to make decisions and 54 percent have a written plan in place concerning their care.
  • The problems they are helping with are serious, with almost half reporting the care recipient having more than one impairment.
  • It is important to understand the full spectrum of caregiving responsibilities. For example, the most frequent caregiving need is simply shopping for groceries. IADL’s are just as onerous, time consuming and expensive as helping with bathing and toileting.
  • One third of caregivers were forced to neglect their own health.
  • The direct financial costs to caregivers will require another column.

Product choices are confusing and that problem will not go away overnight—although product design including clarity of cost and benefit will improve. Just make sure you understand what the cost will be now and forever. Make certain you understand exactly what benefits will be paid when and in what form. If you cannot guarantee cost or benefit you have some serious explaining to do! What must not be confusing is the source of the motivation to buy for potential care recipients. We swim every day in an ocean of chronic risk currently in place, or pending, with strong winds and rough seas originating from the financial and emotional cost of caregiving. Frankly, there is no one else lining up to offer any form of life raft for current or future storms. Carefully examine the quality of your safety equipment and get busy lining up your clients for mandatory lifeboat drills. Confusion is its own form of cowardice.

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: