“All our futures in chronic illness risk abrogation will be defined not by the eight million who bought some level of protection over the last 20 years, but by the 54 million we left behind!”—Ronald R. Hagelman, Jr.
For the past four-and-a-half years my business partner Ron Hagelman and I have been on a journey. In 2013 we were engaged by a British reinsurance company to develop a marketing plan for a product they wished to introduce into the United States. Traditional long term care insurance failed miserably in the United Kingdom, so for the past 25 years individuals got into the habit of planning for their long term care costs at the point of need. In other words, when an elderly person and their family began the search for a care community, all their income and assets come into play to pay for care.
As a result, an “income enhancement” market developed, primarily through guaranteed income annuities (SPIAs). The twist that our U.K. client brought to the table was underwriting for chronic illness. In this case, the more impaired the potential annuitant, the higher the monthly payout. Underwritten SPIAs are nothing new but, by bringing more than two decades of chronic illness underwriting experience to the table, the Brits believed that they could make an important contribution: Long term care planning for people who failed to plan.
Our initial marketing plan called for developing a relatively small cadre of specially trained insurance agents/advisors to help individuals and their families enhance the income available to pay for care on a guaranteed basis for as long as the annuitant lived. Interestingly, this recommendation mirrors how point-of-need care funding distribution has developed in the United Kingdom. We also suggested a handful of U.S. insurance companies that might be interested in partnering with our British clients.
Fast forward a year or so and our U.K. client, Just Retirement, joined forces with Genworth to develop Income Assurance— Immediate Need Annuity modeled after the underwritten guaranteed income annuity marketed “across the pond.” Ron and I watched the process with great interest and continued our research and development around point-of-need care funding. Along the way, we learned that other complementary programs were appealing to the same target market. Let me take a moment now to describe the market before moving on with the rest of the story.
Who is the Customer for Point-of-Need Care Funding and What Do They Want?
The most obvious answer to this question is individuals in need of care now and their families. This is not Medicaid planning, so we’re looking for folks with income as well as disposable assets that can be enhanced and guaranteed to serve one of two functions:
- Bridge the gap between monthly income from investments and social security. Here’s the picture: Mom/dad can no longer care for themselves so it’s time to check into an assisted living community that is able to provide the care they need—cost, $7,000 per month. Monthly income produced from sources mentioned above equals $5,000. Where does the rest of the money come from? Let’s say mom/dad has a home that will be sold or underperforming assets such as money market accounts totaling $400,000 in value. The family could start drawing down that value, or they could take part of it to create $2,000 of additional lifetime guaranteed monthly income to conserve what’s left of the estate; or,
- A wealthy individual needs costly long term care. Monthly income is not a problem, but the family is concerned about depleting a vast estate over an unspecified amount of time. Why not take part of the estate and create a stop-loss against that risk, therefore conserving the assets and possibly growing them over time?
Regardless of the scenario, guaranteed income enhanced by underwriting can make the difference between estate conservation and depletion. This is a powerful message for families at point of need.
However, the most essential customers for point-of-need care funding are care communities—primarily assisted living facilities (ALFs). A constant scramble and competition exists between competing ALFs to maintain high occupancy rates (fill beds) with residents who have the means to pay for an extended period. We’ve learned that care communities are the best access point to connect with potential clients who are in immediate need of care. Stay tuned for more on this.
In addition, an extensive list of centers of influence is helpful to an advisor who wishes to enter the point-of-need market. They include:
- Home care agencies;
- Care coordinators;
- Estate (not Medicaid) planning attorneys;
- CPAs; and,
- Financial advisors.
Now, the Rest of the Story
In mid-2017 Genworth asked Ron and I to reenter the picture. Recruiting and training the right agents and connecting them to care communities continued to be an elusive proposition. We decided to target specific geographic areas with the right consumer demographics. We also determined to try the British model of distribution: Accessing consumers and their families by creating close working relationships with care communities. In essence, our advisors needed to be trained and equipped to become part of a care community’s resident intake process. As our original marketing plan suggested, they needed to place themselves directly at the point of need.
January, 2018, marked the beginning of our renewed efforts. We began with the Dallas-Ft. Worth Metroplex and have now expanded our efforts to Austin and San Antonio. We retained the services of Tony Dillard, who has extensive experience in the care community arena. Over the past five months, with the help of our brokerage general agent brethren, we have recruited and trained approximately 20 agents to be part of the program and have assigned over 100 care communities to them. Their sole purpose is to create lasting relationships with care community staff in order to provide existing and potential residents the finances they need to live the rest of their lives with dignity at a place of their choosing.
Among the many lessons we’ve learned so far are these:
- Care communities are very open to hearing the point-of-need care funding story and how it can help their residents and maintain high occupancy rates.
- Our agents are working in care communities on multiple levels, including:
- Training administrators and staff regarding care funding options;
- Participating in community out-reach efforts; and,
- Holding group and one-on-one meetings with prospective clients and their families.
- Due to the nature of the client, point-of-need advisors need to learn how to work with family members who often act as the Power of Attorney for prospective residents.
- While Genworth’s Immediate Need Annuity is our lead point-of-need care funding solution, agents need to be familiar with other options to help consumers pay for the care they want, such as:
- Converting an existing life insurance policy;
- Veterans Aid and Attendance Benefits; and,
- Home Equity Conversion Mortgages.
- The point-of-need care funding process is not transactional. It’s all about relationship building.
- Agents need to have lots of empathy, great listening skills, and a big heart.
We also anticipate that agents working the point-of-need market will see a significant increase in their traditional and combo product sales to adult children and other family members involved in the immediate-need planning process. Based on experience in the United Kingdom, advisors can expect about 30 percent of their increased revenue to come from ancillary sales. The message to family members is simple and clear: Planning with a traditional or combo product now is more cost-effective than waiting until the point of need.
Currently $705 million of immediate-need underwritten single-premium annuities are sold in the United Kingdom each year. The market in the United States is five times larger than that in Great Britain. This means we are at the beginning phases of developing a $3.5 billion point-of-need marketplace.
Point-of-need care funding is an important addition to the long term care planning toolkit. Far too many people failed to plan, and now they are up against the financial and emotional costs of procuring and paying for the care they need.
