We need a good visual to begin this conversation. Maybe Charleston Heston parting the Red Sea exposing dry ground or the inexorable movement of tectonic plates with continents drifting slowly but surely apart. Bottom line is we cannot ignore the obvious—there are two polar ends of our expanding chronic illness universe. American’s choosing to do something about an obvious risk has, as we know, stayed fairly consistent over the last ten years at about a half a million new owners of some form of protection each year. Rising premiums flavored by the necessity of rigid underwriting have continued to expose the reality of the socio-economic elitism of chronic illness risk abrogation. Clearly those better educated, with more money to protect both themselves and their parents, have developed a predisposition to buy something and not ignore the potential financial conflagration. At this point, no one would argue that price has not mattered. There is simply a cash flow ceiling defining what consumers are willing to allocate to solve the care conundrum. In my mind the American consumer has made it abundantly clear that they can and will only do so much before they are willing to accept the default of governmental care warehousing.
The truth is that, for those who take action, either they understand that the only magic available to leverage risk is insurance or they are currently experiencing the cognitive or financial dissonance created by participating as a family member fiduciary or a coerced-by-circumstance observer. Consumer survey responses have seen a rise in those identifying the necessity of protecting assets. There now exists a virtual cornucopia of choices and alternative financial instruments available to the more affluent to solve a growing perception of what has become, in the minds of many, an inevitable potential risk. Both the demographic of the aging baby boomer generation caring for family members and the clearly visible rise in the cost of care are finally helping to create a growing awareness and buying momentum to do something.
Unfortunately, the good news for agents working the more productive ground of classic risk replacement among the more affluent only exacerbates the exposure of all those middle class families who might also wish to not find themselves at the mercy of governmental bureaucracy. It is also impossible to ignore that the forces that drive the aggregation of sales among the more affluent is in part based on commission levels.
We must admit, at least to ourselves, that getting a stand-alone LTCI or chronic illness combo policy issued and paid is often a somewhat onerous, lengthy and difficult process regardless of your choice of product. With few exceptions what we have to offer has many moving parts, and how the insurance instrument of choice actually works is often difficult for consumers to process. Simplifying the product and streamlining of underwriting remains the only real hope of better delivery to the middle class market. They need guarantees and benefit promises addressing appropriate levels of risk creating actionable levels of premium acceptance.
What is wrong is that, for whatever reason, we have left far too many exposed. Our focus must be on the 90 percent that have not prepared for what, for many of us, could be a devastating financial eventuality. Perched on the horizon are a couple of potentially successful directions.
The most obvious and necessary is a return to the worksite, where a more dynamic and inclusive strategy is most likely to succeed. We can shift our thinking in terms of what we are trying to accomplish with the actual enrollment from replacing the entire risk to providing supplemental protection focused on remaining in control of one’s own claim destiny. This would allow us to offer meaningful coverage to a much wider audience. This would contribute significantly to helping achieve critical mass in terms of middle market sales penetration.
The second major approach is to try to help the 40 percent of those who are declined, and the God knows how many who were afraid to even try based on health considerations. There are methods to avoid excess adverse selection. “Actively at work” underwriting concessions with sufficient participation can fuel multi-life list bill opportunities. Strategies for grading in benefit selection over time can also help with better participation for voluntary enrollments.
On the individual level the morbidity risk associated with life combo is in the seven to 10 percent range. This is still a life sale with only a small risk of prefunding. The ability to accept some level of mild impairment therefore should be possible as well.
Where I see the best hope for market opportunity has been reported in this column before. There are a number of methods to help those individuals about to go on claim and the singed complexions of loved ones surrounding the bomb blast. For those in the greatest need it is now possible to leverage existing assets using a medically underwritten (specifically focused on caregiving concerns) SPIA. There are also life settlement options to provide extra dollars earmarked specifically for caregiving purposes. In addition, assistance is available to facilitate a reverse mortgage, apply for Veterans benefits and secure bridge loans even for those in the greatest need.
Being able to help those who have accelerated their need for care places us squarely among the adult children who no longer have to be convinced of the reality of the claim. If you are unable to put insurance in place among those intimately already involved in a claim, perhaps you should be looking at a profession other than sales.
Other than that I have no opinion on the subject.
