In the beginning, if you held it up to the light, it almost looked like a Med-Supp policy. Surely there were also those who may have thought it was simply just another flavor of disability indemnification. In many ways it was instead a new distribution discipline in search of form, substance and direction. Life and annuity options are greatly influenced by the known and predictable gravitational pull of undeniable mortality. Health insurance profits from the certainty of recurrent morbidity experience. There is ultimately no entrenched consumer disbelief concerning death or illness. Like disability income protection, the acquisition of long term care coverage is based on a vision of a possible distant adverse future event. This perception must be conjured from the client’s own caregiving experience or it must be vividly illuminated by an agent’s ability to explain the reality of the need.
The potential catastrophic financial and emotional nature of caregiving in America is the inherent propellant that fuels our struggle to protect as many as possible before it is too late. The motivation to acquire a chronic illness policy is based on a premonition that already exists in the consumer’s mind or a conceptual risk construct based on a well planned explanation of: “What is long term care?” “What does it mean in my life?” and an explanation of “Why it is not expensive.” The problem of course is that the very folks who know they need to transfer the risk to an insurance company are frequently exactly the wrong prospect.
Placement rates are at an all-time low. At least four out of ten who have the courage to complete a 50 page application will apparently not be eligible for coverage. Unfortunately, we already have too few agents even attempting to help place LTCI protection. The number one obstacle to greater sales is probably underwriting frustration. The fear of rejection remains a barrier to increasing sales. Too often underwriting, that took too long to begin with, stood as a possible specter ready to destroy existing client relationships and potentially jeopardize current premium.
If we wish to ever change the existing paradigm, we need to address the problem on both ends. We need to rebuild a better approach for business going in the hopper and better alternatives after adverse underwriting results have poisoned the transaction/relationship. It is not one problem but two: Cause and Effect! It is time to stop patching what is already clearly broken and reboot our approach to the sale and our dedication to help all those who are willing to make the attempt to help themselves. In no particular order of significance, maybe we can at least stir up an introspective conversation:
- Return to a universally mandatory requirement of no C.O.D. Cash down equals commitment up front. This also blunts the often too frequent “medical close” and encourages honesty in the beginning.
- Field administration must pre-underwrite all sales and ask all the questions every time.
- Reinforce and legitimize “Underwriting Hot Lines” by formalizing informal submissions. Informal quotes, if adequately documented initially, must be held valid (just like life insurance) unless there is substantial change in the submitted information. This will require that authorized BGAs be allowed to order their own APSs.
- Companies must reconsider where they draw the lines of responsibility concerning prospective submissions. As an example, until an application has been compared to the para-med, MIB and RX screen it is not considered a valid submission in terms of placement rates.
- Perhaps require the use of electronic applications or at least weight them differently. This enhances the quality of submissions and sets the stage for drastically reduced underwriting time frames.
- The time has come to better control agent and general agent submission privileges. Someone knowledgeable must be in place to screen applications . The authority to submit directly to the home office must be earned and well documented. This however must be policed at the company level.
- No more political submissions: ”This is my best client, I have to at least say I tried.” Try the truth—it works better for all concerned.
Agents and general agents must do a better job of managing expectations. The LTCI risk, as we know, is leveraged successfully by applying a liberal dose of good health backed up with financial commitment.
- Particularly since HIPAA, sales have been farmed in a monoculture. (All corn no soy beans.) Current sales should not become an either/or product proposition. We must do a much better job of helping determine the direction of the sale—stand-alone, life and annuity combo or short term protection—one size does not fit all.
- There is nothing easy about any of this. Brokers and general agents who are not able to dedicate time and training necessary to successfully submit business must allow those who have specialized to help. BGA’s who really only handle a few cases need to outsource administration, and agents who infrequently write LTCI need to be willing to “split” cases with professional LTCI specialists.
- Last but certainly not least the entire industry must stop wasting and subverting the needs of so many that have pre-established or prospective impairments. Surely we should be able to build creative and limited response policies to address the needs of so many that are systematically turned away—much as we have with other lines of business.
Better quality business coming in the front door and a new market for those that are not successful running the underwriting gauntlet has the best hope of success. There is sufficient confusion, disenchantment and consternation to go around. A fresh start built on a complete re-examination of purpose and process is required. Frankly nothing less will help.
Other than that I have no opinions on the subject.
