Strategic Thinking

Periodically it just becomes necessary to go to the blackboard and wipe it clean. New advisor focused research is being released this month. Who is Selling What? To Whom, How and Why? is a follow up advisor survey to work reported here in May, 2004, at the apex of stand-alone traditional sales. The Producer’s Perspective on Long Term Care Insurance was accomplished at that time with the help of LIMRA International, the Society of Actuaries and Broker World. Times have changed—today basically 90 percent of any version of long term care planning sales are now classified as “combo life” sales, and it was simply time to again ask questions of those closest to the actual sales transaction. The current project was conducted with extensive help from independent and career distribution (NAILBA and NAIFA), BGA’s, NMO’s, combo life companies, The Center for LTC Reform and Broker World. The survey was sponsored and conducted by Oliver Wyman consulting actuaries and Ice Floe Consulting marketing and distribution consultants. An ongoing discussion of the findings will be a foundation of this column for several months.

We knew that we would be refining existing perceptions and evaluating best practices. It was the nuances of motivations and predispositions with consumers at the point of sale that we wished to hold up to the light for examination. Most importantly we wanted those insights to originate with those who at the point of sale actually bake the cake and make a sale happen.

It’s of course the most potentially global revelations that arrived in our minds on a purely speculative basis that need to be examined first. The survey itself is “data rich” from a statistical standpoint. It will be here in this “opinion rich” column where we can have fun with what it may all mean.

Let’s begin by saying we simply need more of this advisor focused sales analysis. Prior surveys have examined consumer wish lists prior to purchase and then measured rationalizations as to why a particular benefit was popular after purchase. These are opposite ends of a polar sales spectrum, one tainted by adverse selection and the other by cognitive dissonance. What we need to know is what happened in the middle.

In terms of those who eventually acquired any form of a long term care planning product, our overall placement success over the last 15 years has fallen by 50 percent. Traditional stand alone has fallen by 95 percent and more than half of the combo life sales do not involve any additional premium. Each year we continue to restrict our sales to the most affluent. From a distance it appears the sales of which we are the most proud could be perceived as unnecessary. We all know we must return to protecting those actually at risk. Without a full blown and well-orchestrated attack on the Mass Middle market we simply become a progressively superfluous exercise.

The first step in the right direction involves institutionalizing long term care planning in your practice. If you engaged in “the conversation” and merely offered something, frankly anything, we are all off to the races.

Jumping off the graphs of the survey was a clear and heartening recognition by producers that, while cost will always matter, the quality of the benefit offered to their clients was first and foremost in their minds. For example, zero current premium chronic illness ABRs were recognized to add something to the sale, however they overwhelmingly preferred benefits that could be defined as valuable at the point of sale and therefore required an additional premium charge as best for their clients.

What is old and should be ingrained into all sales is the necessity of periodic review. Changes in need, product performance or the advancement of available benefits must be a component of a successful insurance practice. The survey revealed a recognition by advisors that the presence of a long term care planning option, specifically both 7702B and 101g riders, has sufficient gravitas to justify a policy replacement conversation. This potentially represents an enormous opportunity for future sales activity.

Some answers we already knew or strongly suspected confirmed universal truths that must no longer be glossed over. Consumer and advisor awareness has always been the answer. The survey suggested that consumers do have a greater understanding of the risk and the choices to respond to that risk. And those advisors who include long term care planning in their practice are best prepared to facilitate financing decisions.

Yes, there is frustration with continuing rate increases, restrictive underwriting and insufficient product to be able to reach a larger audience. Our time has not been wasted. We should be fairly certain that by now we have uncovered our mistakes and have moved to remedy them. The survey tells us we do have a well trained and passionate advisor base and that we must now finally work together—advisor, distributor and company—to rebuild our dedication to training, education and outreach to more consumers and advisors.

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: