Out On A Limb

Maybe it’s as simple as just “Follow the Money.” Maybe it’s not about bloated premium thresholds, restrictive underwriting barriers, short-changed benefit definitions, efficacious training techniques, carriers that forgot they are in the risk business, advisors efficiently continuing to hide from the battle or intransigent consumer blindness. I was recently asked yet again to condense my thoughts about the future of the long term care planning market. A market that seems to continue to drift into dead end activity cul de sacs where premium may sit and spin but does not expand into a greater sales environment. Specifically, how can we return to providing protection for those truly at risk? So as someone who chooses his words carefully, here goes:

“Stay at home if at all possible, focus on quality private managed care regardless of the funding source, leading to a supplemental risk solution.” We are indeed all in this together.

  • Risk amelioration works best when layered—public, private, corporate, payroll, reinsurance—each helping to create stacked specific and aggregate. It makes no difference who is on top or bottom or in the middle. The problem must simply become more financially manageable for many more Americans.
  • Virtual underwriting seems capable of binding a million of term life from the consumers phone and several current payroll deduction combo life plans are available guarantee issue. Why can’t we limit and define smaller bites of this risk? Why can’t the strength and comfort of “at work” or “black box” underwriting concessions find their way to the stand alone corner of our sales universe?
  • My suspicions are that we have not exhausted the structural benefits of joint underwriting philosophies. For the most part why do we continue to place equal amounts of insurance on a couple when the chances of two catastrophic risks are extremely small?
  • Why do we continue to view the risk as a level playing field from the inception of the sale when we know the risk is initially basically dormant, very gradually picking up speed with age, and ending with a claim spike at the very end? Why do we continue to sell level premium and level risk? Why doesn’t risk and premium follow the reality of the problem?
  • For years my children, and more recently some of my younger colleagues, have suggested that changes in our technology, distribution and advisor base may have snuck passed me in my sleep. Perhaps the most frequent observation concerning my loss of touch is that too many advisors only care about assets under management. When Voltaire was asked if he believed in God after a lifetime of opposing the Catholic church, he answered that he could not imagine a watch without a watchmaker. I cannot imagine any financial plan completely exposed to a potentially catastrophic and ever present contingent liability without some attempt to understand and effectively plan ahead. I strongly object to those who intentionally ignore reality regardless of their age.
  • Our market continues to paint itself into a corner. Perhaps unintentionally but none the less limiting sales growth to the most affluent clients. Product support and compensation for the hard work of explaining the necessity of this risk have removed us from our original mission of providing protection to those truly at risk. The most recurrent theme, and I would suggest heartfelt commitment, is to a renewed market yearning to return to again helping the middle class avoid dependence on the government, family and loved ones.
  • Now, I must ask one for future thought and to determine if anyone is still reading. Recent rate increase actions have been offering a cash settlement as one alternative to lapsed coverage. I welcome the option. But it brings up a very interesting money question. Those settlement dollars are individualized based on the premium reserves of the individual policyholder. The question that should arise in your mind is: Who do those specific reserve dollars belong to? Although you cannot access those dollars, the company can basically offer a return of those dollars to you on their terms. Let that sink in. Now ask yourself: If my client takes a partial lapse in the form of reduced benefits at the time of a rate increase, where did the released reserves go? I’m confused.

If we do not revise our goals and break free of our misconceptions, we are most certainly doomed to history remaining in a time loop.

Other than that, I have no opinion on the subject.

Ronald R. Hagelman, CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products.

A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing “friend” of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman and his partner Barry J. Fisher are principles of Ice Floe Consulting, providing consulting services for Chronic Illness/LTC product development and brokerage distribution strategies.

Hagelman can be reached at Ice Floe Consulting, 156 N. Solms Rd., New Braunfels, TX 78132 Telephone: 830-620-4066. Email: ron@icefloeconsulting.com.