It’s Not Just About Good Math, It Is About Meaningful
And Progressive Insurance Math
Positive sales results involve risks.
We recognize that good money management lies at the heart of insurance. That in a classic sense insurance companies are certainly sound financial institutions. However we also understand that it is our unique ability to manage and accept some level of risk that provides the meaning and the opportunity in what we do. Known and managed levels of risk acquired by the predictability of historical mortality and morbidity knowledge is the energy source that operates the machinery. To avoid risk is to avoid sales. Insurance companies are not banks or credit unions. The only question that matters in our view is: How much is enough? It is specifically the production thresholds mandated by this question that best predict success or failure.
A Crystal Ball
Product response to the largest financial risk faced by our battered Baby Boomers has been lengthy and varied over the last 25 years with the birth of tax qualified options. As usual the hind sight inspired notion that we oversold benefit and underpriced risk is an all too familiar lament of the post-game armchair finger pointers. In the past we built and sold based on all the issues, dynamics and strategy compromises outlined in this article. This particular risk has frankly been unlike any other in the past. Resistance to accepting the reality of this potential catastrophic financial train wreck has been legendary. The misconceptions about actual cost or likely collision with the real cost of care have been eroded by our marketing efforts but remain prevalent. The product ownership “love” of those who did buy expressed by unprecedented persistency never before seen in previous health product could not have been predicted. The drama of onerous rate increases, restricted underwriting and carrier retreat from the market has decimated faith in the current market by all its stakeholders.
New Market Development and a Path Forward
The risk is very real, 20 percent of Boomers will experience a catastrophic care event. A hopefully symbiotic relationship between public and private resources will be established funding care costs in America. Consumers still prefer to have assistance from professional insurance representatives. Private insurance options both primary and supplemental will remain available and essential as a product resource. Post COVID thinking will place emphasis away from institutional prejudices to home and community-based choices. Technology will play a huge role in managing care in the future and insurance will meet and support that challenge. A new renaissance of product options will continue to require meaningful math and dynamic sales support. The perennial relationship between those who bring in the money and those who count it will remain, as it always has, at the center of an ever expanding universe.
Underwriting concerns will continue to define the nucleus that impedes or expands our sales progress. In truth they lie at the heart of any care amelioration insurance strategy going forward. The immutable laws of an adequate spread of risk demand some form of coercion. The only way to accommodate preexisting conditions is to mandate sufficient participation. The current political climate is projecting this reality in a manner that should have us all concerned and on full alert. The one lesson that our past in marketing insurance solutions has made abundantly clear is that adequate voluntary participation concerning long term care risk has been simply beyond the reach of our industry’s product offerings. The battle lines are clearly drawn between public or private management of America’s largest unprotected risk:
- As of this writing seismic federal “social” infrastructure legislation is pending. It would facilitate a dramatic increase in Medicare home health care management and Medicaid eligibility.
- 100 percent mandatory employee payroll tax supported State managed social insurance originating in the pacific northwest would establish a new permanent mandatory social insurance bureaucracy. Currently under consideration by 20+ other states.
- Legislation has been introduced in Washington DC that would establish an employee and employer shared mandatory social insurance program offering means tested stop loss protection for major care risks.
The winds of change are building just off shore. The sirens song lure of mandating adequate participation and collecting new taxes establishing comprehensive government management of our care futures is achieving named hurricane status.
In our humble opinion, never before has the symbiotic relationship between marketing and actuarial been more important in building private insurance alternatives. One way or another we will be forced to go to the blackboard and begin again. Personal choice of care and at least private control of your claims destiny must not be the exclusive territory of political expediency.