Complaining about the obvious is rarely helpful. However, no matter how you hold last year’s production up to the light it is not a pretty picture. The concern, of course, is the residue of attempting to secure coverage, the aftermath of the collision with home office processing, and determining what constitutes the new normal for submitting and hopefully issuing business going forward.
An inventory of the new realities of policy submission and issue may be the best place to start. Applications already the most extensive in our industry seem to have gotten longer, with new, additional forms attached and more signatures required. Cognitive screening is now required at younger ages. Parameds and lab work are required on the majority of all new individual cases. Regular periodic attendance at your physician is almost a new prerequisite to buy. Simplified issue, when available, is really only a marginally shortened part 2. Fewer carriers and cyclical fire sales have strained service issues with all the companies. I would venture a guess that the number of days between submission and issue is the highest we have ever experienced. The truth about insurance companies is that the only structure where they have complete control is service. Poor service, even when created by events beyond corporate control, dramatically exacerbates sales problems everywhere else.
I am absolutely positive that placement ratios are at an all-time low industry wide. The connection between lagging service standards and consumer buying are painfully obvious. I recently heard an LTCI general agency explain to a prominent LTCI company that the most frequent conversation they have with agents begins with, “If they can’t issue policies, how can I expect them to pay claims when the time comes?”
Historically one out of three applications does not make it all the way to “in-force.” Traditionally about 15 percent are declined, and the balance split between withdrawn and not taken. It should not be unusual to suggest that very restrictive new underwriting with issue times at an all-time high have played hell with these numbers. There are, of course, issue and placement concerns that have always been a unique component of LTCI. This is a tough sale, and convincing a client to buy may have exhausted all available goodwill. In other words, many agents do not want to go back for additional underwriting information or forgotten signatures. Field underwriting takes on special meaning as well. After pressing to make the sale there is reluctance to press for information on all impairments as well as detailing all current medications. LTCI is also extremely price-sensitive. Taking an offer back other than applied for is difficult. Perhaps the biggest problem remains where a couple applies and one of them is declined. Regardless of how sincere your conversation is to explain cutting off your emotional nose to spite your financial face, it is often very difficult to keep the remaining policy on the books.
It is simply time to go back to the very beginning of this sale and start over. We must reset expectations or the new underwriting and pricing wear-and-tear will put us all in padded cells. Why not begin by emphasizing the obvious! This is a very important sale! It is critical that we as an industry work very hard together to make every effort to protect the proposed insureds and their families. These are not easy policies to obtain, and premiums are not cheap. There is a reason—the risk is real and substantial and potentially devastating. We must work to gain admission for our clients to an exclusive club—those who have achieved the privilege of transferring their risk burden to the insurance company.
This product is heavily underwritten. We must tell the whole truth and nothing but the truth about medical history and current medications. The company will not miss anything. If we don’t start out with the truth we will have no chance at all. The client may have to have a physical exam. He may have to give blood and urine. He may have to take a cognitive screening test, and he needs to be ready and prepared for that test. This is not easy, and if the company has to obtain medical records it may take some time—30 to 60 days is not unusual.
It is very important that we give this our best shot. If one of the joint proposed insureds is not accepted, the client needs to understand the increased importance of accepting the offered policy. If we cannot secure this coverage there are some other options we can explore. These are the longest and most extensive applications in insurance, and as we go through the underwriting and issue process, we may have to return with additional paperwork. Like many of the most important things in life, this is not easy, but it is so very, very important. This is exactly why it is necessary to begin immediately and be with the client every step of the way.
As LTCI sales specialists, we have all created our own private mantras. “The risk is real, the solution is obvious, premiums will continue to rise and underwriting will become even more restrictive.” And now we must add: Our customers should not enter into this process unaware that “the journey from application to policy may be arduous but necessary.”
Other than that I have no opinion on the subject.
