Perhaps we just don’t like to dance. Far too many have remained casual observers. A reluctance to participate has kept the vast majority of consumers and agents glued to their chairs. They know that the dance of life requires mandatory attendance. They acknowledge that the music is compelling and that none of us is completely devoid of some sense of rhythm. The majority of Americans and their insurance professionals remain all dressed up and waiting to be asked to dance. We intrinsically know there is no escape from the dance and the importance of taking part in the festivities, yet we continue to appear to lack the confidence or the perceived popularity to stand up and take our proper place on the dance floor.
There are signs that this may be changing. If you look carefully at the wallflowers assembled at the periphery, you will begin to notice some toes tapping and the subtle beginnings of animation and intent. The music is loud and compelling. We publicly spend well over $100 billion annually, with unpaid caregivers contributing another $450 billion. There is universal agreement that remaining motionless in the face of compelling evidence to take action will be catastrophic. The number needing care is expected to explode from 12 million today to 27 million by the year 2050. Complacency on the dance floor is no longer available. The Congressional Budget Office projects that total spending from all public and private sources will mushroom from 1.3 percent of GDP in 2010 to 3 percent in 2050. There is no choice but to restrain public spending and increase our dependence on private solutions. This understanding and recognition of reality is currently taking hold in several other developed nations around the globe. It is no longer a question of who will lead—public or private financing. It is much more important that we begin to work out how we can dance together and not step on each other’s toes. No one in his right mind would suggest that our current attempt at synchronized dancing is working on any level.
We remain desperately in need of reform both public and private. The potential cost in terms of lost productivity as family and friends step in to fill the void jeopardizes the future of all Americans. We are simply not ready. Only one-third of all Americans are financially prepared for retirement. We must change course now or stop and prepare for the inevitable devastation that will be caused by the emotional and financial firestorm at our doorsteps.
Inevitably your ability to dance is fueled by the clothes you wore to the prom. As income increases, so does the acquisition of private insurance. There have always been two markets. Those with substantial assets to protect, and those with sufficient assets and income to remain teetering on the edge of maintaining control of their own claim or being exposed to the possibility of becoming just another ward of the state. The truth continues to remain maddeningly unavailable for viewing. Most continue to believe that someone else will pay. However, the central truth will always remain: “If you can afford to pay, you must pay!”
As you might suspect, we will never be asked properly, except perhaps in a tangential manner, what should constitute meaningful governmental reform. Just know that at its conceptual core there will be a flight from expensive institutional settings to more care at home, and that in the process, cost will shift in the same direction. Know also that the cost of protecting the middle class will be funded at the worksite and that some form of additional social insurance is inevitable. There remains, however, a clear recognition of the continuing importance of private insurance as evidenced recently by statements reinforcing the necessity of private solutions by the Federal Commission, the SOA “Land This Plane” research, and the new retirement initiative from the BiPartisan Policy Center on “America’s Long Term Care Crisis: Challenges in Financing and Delivery.” They each confirm a need for a strong and concerted effort from private insurance to continue to help meet the growing crisis.
The important question is: What can we do to encourage increased activity and more spirited dancing? There are growing signs of reanimation. Current estimates are that 30 percent of all the life insurance policies sold have some form of accelerated benefits attached, at least contributing to meeting anticipated expenses. Anecdotal evidence also suggests that reinsurance in this area is strengthening as demand for combo products increases. The sweet music of reform is in the air. The NAIC is reviewing greater flexibility in our product offering. Product innovation is picking up the beat. New ideas to both limit and share risk are again receiving careful evaluation by companies and reinsurers. Universal LTCI certification is becoming a near term certainty, meaning the chairs occupied by wallflowers are being removed slowly but surely from the dance floor. You may be able to stand and gawk at the assembled dancers for a little longer, but you will not be able to sit comfortably and watch from the sideline. Many more combo solutions are continuing to find space on the dance charts. In order to get everyone on the dance floor we must continue to improve the risk solutions available and their delivery in both the public and private marketplace.
There may be trouble ahead
But while there’s moonlight and music
And love and romance
Let’s face the music and dance.
Before the fiddlers have fled
Before they ask us to pay the bill
And while we still have a chance
Let’s face the music and dance.
Lyrics by Nat King Cole
And other than that I have no opinion on the subject.
