Dangling Participles

Suggesting that Americans are unprepared for inevitable future emotional and financial turmoil falls into the cosmic understatement category. Only one in five have a will or any last directives. Just a little over half own any form of life insurance. We are lousy at saving, having an average of only $15,000 put aside. Yet we somehow continue to have faith that a leprechaun will appear at the end of life’s journey and provide financial sustenance for our marital partners, largesse and remembrance for our grandchildren, private rooms at five-star hospitals and beautiful Swedish nurses for our superior one-on-one care at home.

Fantasy is wonderful at a superhero movie. It has, however, always been a measure of your powers of persuasion that allows a small dose of reality to intrude and provide some attempt at planning ahead. Believing that your sales presentation succeeds based on your skills to illuminate financial risk suffers from the same hubris that allows consumers to boast that they bought insurance because they are simply wise and wholly committed to protect themselves and their loved ones. Forgive my skepticism!

In my humble opinion, and frequently mentioned in this column, the only source of buying behavior is the 51 million living parents of aging hippies. The discomfort and uncertainty generated by those living the problem becomes painfully obvious to all but the most severely myopic.

Life insurance sales in general remain flat or, perhaps more accurately, sinking slowly in a national malaise of indifference. There is one exception: Combo life. I can’t imagine a more natural merger of concepts, as the number one cause of death is, after all, chronic illness.

There are, give or take, about 50 companies that have succumbed to the most frequent rhetorical question of today’s sale efforts: “Does your life insurance provide long term care/chronic illness benefits if needed?” Again, as endlessly suggested in this column, it is simply too easy to sell against those who do not.

Remembering again that this is an opinion column, the 80/20 rule now applies. Regardless of which IRC code is your cup of tea, about 20 percent offer something of real value and 80 percent do not! Much of what masquerades as a combination of risk amelioration is seriously flawed behind the mask. The added rider too often appears as a half-hearted accommodation to pressure from the field and a self-serving desire to be able to claim “me too!”

Why is it so hard to do this right?

Clearly there are companies that took the time , effort and investment to provide a quality alternative to stand-alone LTCI. And once again there is nothing wrong with long term care protection resting squarely on a health insurance chassis. It is the inherent structural limitations of health insurance that fuels the conversation of offering a combination option in the first place. Health insurance has multiple moving parts as it indemnifies various specific risks, it remains vulnerable to ongoing experience and, by definition, it must be extensively underwritten.

Which part of the above did you not already know? Combo policies therefore begin by answering the historical complaints of LTCI: Too many moving parts, embarrassing rate increases and lethargic underwriting practices. It doesn’t get any simpler than a percentage of the face amount paid monthly, available guaranteed premium rates and streamlined underwriting progressively accessing virtual underwriting technology.

Recently, and old friend from a long established brokerage general agency sent over their current spreadsheet for combo sales and asked, “What am I missing?” Most of the time I would have glanced at the list of companies and made a few offhand recommendations. But I knew that this agency principal cared about what was sold and represented in their name. I therefore stopped and carefully provided a much different list of what makes a good, versus an inadequate, combo product offering:

  • Are the premiums guaranteed?
  • Can you define now the benefit the client will receive at the time of claim?
  • Does it include a residual death benefit?
  • Is the predicted time in underwriting for the majority of cases less than a week?
  • Are there any structural limitations on benefits paid?
  • Are benefits paid in unrestricted cash?
  • Is the cost of the rider less than five percent of the premium?

If the answer is no to any of the above, there better be a very good reason beyond quality and your desire to offer only the best to include the offering in your inventory!

Other than that I have no opinion on the subject .