What was old may be new again. Unlike men’s ties or the length of women’s skirts, where style seems to recycle itself with historical déjà vu, LTC insurance seems to reinvent itself in a more straight-forward, progressively improved pattern of advancement.
As far as individual LTC insurance sales are concerned, we do appear to learn from our mistakes and consistently build a better product.
Multi-Life LTC insurance is different. HIPAA tells us LTC insurance is health insurance. Therefore, it seems that multi-life LTC insurance should be bought, sold and administered similarly to how health plans have been during the last 30 to 40 years. Of course, this is not exactly what happens.
Almost all primary brokerage carriers have begun to offer small group solutions during the last three years. Each has jumped into the market “pool” without knowledge of water depth or the commitment to get wet. At the same time, there are actuaries who believe it is impossible to escape the gravitational pull of adverse selection and that no level of additional premium or risk spread will allow a reduction of underwriting criteria.
I absolutely disagree with this myopic and short-sighted refusal to engage the marketplace. As a national marketing organization, my company introduced one of the first multi-life programs more than six years ago (The Employees LTC Foundation Plan issued by Loyal American Life). The 2010 LIMRA statistics continue to reflect that worksite marketing efforts are successful. True group, multi-life and association business represented 56 percent of sales, with multi-life showing the greatest strength. The majority of new LTC insurance premium was sold with an affinity discount.
Multi-life marketing is built on several immutable principals:
1. Sufficient participation, which relies on controlled health exemptions and the bedrock—“actively at work” definitions—has always been the successful strategy for employee enrollment.
2. Spreading risk by utilizing a comprehensive marketing approach—including carve-out, core buy-up and corollary sales—contributes to expanded sales. Affinity discounts are provided for spouses and family members; and some companies also offer reduced underwriting for spouses, based on an established participation threshold.
3. Discounted premiums for employees, spouses and family members and limited underwriting are two iron-clad promises all group/multi-life sales always offer.
4. Standard (not preferred) rates and underwriting costs reduced by definition are two additional characteristics that contribute to the success of multi-life LTC insurance products. In addition, the average age of a policyholder is mid-forties, and persistency is influenced by normal employee turnover.
Participation thresholds have increased and gatekeeper questions have been enhanced as companies search for the best blend of marketing finesse and underwriting incentive. More importantly, very few “players” have left the arena and, hopefully, those that left may eventually return.
The marketing environment is what deserves additional emphasis. Opportunity for sales remains enormous—there are several million businesses with fewer than 500 employees. Abbreviated short-form underwriting continues to provide opportunities to offer coverage where none is available in the individual market.
Let’s revisit what makes this sale so exciting and reexamine where we may have gone slightly off course.
What is it that makes the multi-life sale resonate with employers and employees? First there are the tax benefits to employers—dollars spent for employees are 100 percent deductible and devoid of payroll tax. Employees receiving the LTC insurance benefits not only get them free but they also own a policy that pays tax-free benefits. The absolute cheapest pay raise ever!
Utilizing a section 105 medical reimbursement plan allows an employer to choose who gets the benefits, based on any combination of income, length of service or job description. Benefits do not have to be homogeneous, and there are very few limitations or restrictions on the number of employee classes allowed.
Once the decision maker in a corporate setting is made aware of the issues of asset protection and the burden of caregiving, buying opportunities are endless. For the most part human resources personnel should not be the initial contact; they are, in my humble opinion, an anathema to successful sales. They have no direct relationship to any of the decision making variables, and they can contaminate a benefit conversation—comparing LTC insurance to pet insurance and vision care.
The basics of the sale have not changed. Conversations about offering LTC insurance as a benefit almost always originate with the insured, not the agent. Frequently, the perception of the need has arisen internally.
Find the source and you will find the sale. Each case involves a census and determining where to draw the line where the employer cares. Maybe just the owner will have coverage; perhaps the vice presidents, managers, or those who have been with the company ten or more years will be included. (Maybe just the bookkeeper who knows where all the financial skeletons are hidden.) Thus begins the first step—the carve-out.
Unfortunately, the carve-out is far too often the full extent of the sales effort. Carve-out discussions based on the fear of economic loss or a personal experience with the catastrophic impact of caregiving have dominated our sales expectations.
I believe that by taking this approach, only the low hanging fruit has been picked. We need to work harder to liberate the need for protection inherent in every group regardless of size. The next step in the conversation that deserves the greatest attention is the holy grail of successful LTC insurance sales—core benefits. This is the secret that transforms the opportunity to help and unlocks an almost unlimited benefit treasure.
Important Truths
1. Some LTC insurance is indeed better than none. A small amount of insurance dollars can make the difference as to how and under what circumstances clients will receive care. Reality at the time of claim does not have to be based on a choice of 100 percent of your client’s money, 100 percent insurance money, or 100 percent government money. It is more likely to be a little of each. Leverage is leverage.
2. Voluntary enrollments are never successful unless management believes and publicly supports the cause.
3. Knowledge is sales power. Employees must be able to make informed decisions; they need to know exactly what LTC means, how it can directly impact their lives and the basic math of insurance options. In other words, they must understand exactly what it means to not participate in the offered protection.
4. LTC insurance at work is not expensive. Core benefits are now available that provide as little as a one-year benefit, facility only, with average premiums of less than $5.00 per employee per month.
Providing core benefits changes the entire sales conversation. You are no longer asking, “Who wants to buy?” You are instead enhancing an important corporate-provided benefit. The opportunity for employee buy-ups, spousal additions and family sales is limitless.
This is the sales concept that changes everything. Recently a friend who manages a light manufacturing company described his hands-on management skills: “If I can do it, you can do it!”
Employers must understand the bottom line—they must help and lead by example. How can they expect their employees to believe if they do not? That $5 to $20 per month is critical to your ability to succeed.
You are not in the business to see just a few employees to whom you might be able to sell some insurance. You are there to protect as many employees and their families as possible from America’s largest unprotected risk and protect employers from lost productivity caused by caregiving needs. You simply cannot do it alone.
The hard dollar cost is incredibly small and it generates a gigantic difference in your chances to make a real difference in the lives of employees and, at the same time, protect the assets of a company. The employer is going to write off the dollars anyway, and those dollars represent a cost that is substantially less than 1 percent of payroll. No real impact on the bottom line but enormous impact on the lives of employees.
Employers get to be the heroes by helping you help their employees do the right thing—inexpensively. Plus this extremely visible benefit represents a deductible pay raise for all employees with no FICA, no FUTA and no W-2s—plus it even pays tax-free benefit dollars.
Just say NO to purely voluntary conversations and do not let the sales stop at the obvious carve-out. This is the sale that does not just happen, it must be made. This requires the best in us and connects directly with the best in our customers. Go forth and multiply—but do it right!
Other than that I have no opinion on the subject.
