A very short 16 years ago the promise of stand alone LTCI was shining brightly. We had directly addressed a pressing need with the help of a clear cut legislative mandate. Over a hundred companies had flocked to our cause. Sales growth had been steady since HIPAA. In marketing staff meetings across America we congratulated each other on our marketing wisdom and optimistically predicted continuing successful growth. And then quite frankly our chickens began to come home to roost. There was simply much we knew and conveniently misplaced in our minds:
- This was health insurance after all and would be subject to claims experience. I remember vividly standing at the first ILTCI Conference at that initial cocktail gathering hearing many wish we had more claims experience. Careful what you wish for.
- We knew sales drift to more affluent customers as time goes by. We knew big premiums and big commissions were a well known and potentially dangerous siren song, but the music was so sweet we could not resist.
- We knew this was a contingent liability but the cost for catastrophic coverage was so competitive when measured against the potential risk, why not just sell life time benefits with five percent compound inflation protection? And so we overloaded the boat.
In fairness, there was also much we could not possibly have seen:
- The persistent failure of Medicaid to provide quality care.
- The rise of expensive private pay facility care vendors.
- The historically unique love of these new policies once purchased.
- Market pressure to enhance and perhaps over sell non-insurance benefits.
- The reality that adverse selection lies at the heart of this sale. Those most anxious to buy see the genetic handwriting on the wall.
If this is beginning to sound like a post mortem, it cannot be helped. Beginning 15 years ago the earth beneath our feet began to shift. As premiums rose, as a reflection of the items outlined above, sales have fallen year after year. Last year the LIMRA numbers for individual LTCI sales were dismal and disheartening. No amount of optimism can reanimate the reality of the numbers. This year fewer consumers will buy stand-alone LTCI than fill a college football stadium on any one Saturday. To put it in perspective, that is how many lives were sold by the top 23 companies in the first quarter of 2009—just ten years ago. Just a couple of fast observations before we move on to what is selling. The strength of our best years came from corporate premium deductibility and advanced modal premiums, and they are still standing there with open arms welcoming potential customers., Much of the stability and promise for growth came from worksite sales now desperately in need of a rebirth and innovative strategies for combo sales in this arena.
Now for the good news: This year we are approaching half a million buyers of some form of combo life policy. There will be plenty of future grist for the mill in this column. Perhaps the number that jumps out of the 2018 LIMRA numbers is that recurring premium policies grew to 93 percent of all sales in 2018. We are clearly seeing a desire on the part of the mass affluent to take advantage of this extended care risk approach. Although combo UL represented two thirds of all combo sales, it was whole life that showed the greatest statistical growth. Guarantees do matter. Long term care IRC 7702B and chronic illness IRC 101g were equal at just above 40 percent each with asset based extension of benefits making up the difference in premium although representing the largest number of new policy holders. Frankly we should like everything about this solid and hopeful growth:
- Premiums are stabilized and predictable.
- Structurally, as a rider, the risk occupies its correct location as a contingent “possibility” not a catastrophic certainty.
- Net cost for the risk has been dramatically reduced.
- There is no reason this should not be a part of every sales conversation. Fiduciary responsibilities are direct, visible and certain. Omitting this conversation becomes increasingly perilous.
It is here that we need a quiet and reflective prayer:
“May we be blessed with the wisdom to not relive the past. May our mission to guarantee future private pay status be much clearer and our potential customer base be much greater. May the companies with the courage, stamina and patience necessary to develop not just new product but a new and vibrant middle class market please step forward into the light!”