What keeps haunting all of us is our persistent inability to adequately ameliorate this risk. I’m not sure our industry has ever faced such a clear and present threat to all we hold most sacred—not only an institutional desire to preserve assets and income at retirement but a strong moral commitment to do all we can to improve the quality of care our customers will receive. Long term care risk so obviously cries out for an insurance solution yet continues to frustrate our sincerest efforts to be helpful. The LIMRA numbers for 2014 are of course disheartening for all of us who try so hard to convince agents, consumers and companies to be prepared for the inevitable.
My first plan after absorbing the reality of the production numbers is the same one I have every time I am staring at bad LTCI news. I always have a vision of “Boxer,” the horse in Animal Farm. His defiant voice rings in my ears: “I do not believe it. I would not have believed that such things could happen on our farm. It must be due to some fault in ourselves. The solution, as I see it, is to work harder. From now onwards I shall get up a full hour earlier in the mornings.” This time is different. Instead of once again examining my work ethic, I have had a blazing epiphany. I think we are all beating a dead horse. I believe that with a legendary single-minded focus, many of us have repeatedly re-enlisted to fight a battle that is already over. Is there really anyone who does not accept the sound planning strategy of utilizing insurance to leverage a known and potentially catastrophic risk? Our only job is to identify and then measure any financial threats to our clients and their families. We then isolate and insulate that weakness in their defenses and hopefully apply a liberal dose of insurance to seal the breach.
We just keep trying to fight the same battle with persistent diminishing results. Frankly this sale, and this somewhat stale rationalization process, has in some ways just worn out its welcome. It’s a permanent and entrenched part of our repertoire. We rapidly look at the cost of care, estimate the “average” duration of a potential claim, and then throw in as much inflation protection as possible—and abracadabra, our responsibilities are fulfilled and our fiduciary chores are successfully accomplished. This has been our single target and our chosen response, at least since HIPAA. Same target, same response…lackluster results. What did I miss?
We keep trying to improve our delivery accuracy with marginal success. We continue to rededicate ourselves to taking better aim at the same bullseye and then we live in fear of the next LIMRA report. Survey after survey confirms the obvious: if you have money you would, could and should buy a policy to cover the financial exposure. We all also live with ambivalent mixed emotions, every time we help put protection in place. We know that protecting assets and income at retirement is our primary mission, but we also know that what convinces people to buy is their own personal experience with the realities of an extended claim. This sale may be about replacing financial risk with insurance, but it is accomplished by an understanding (known or communicated) of the emotional burdens of dependence and caregiving.
Unfortunately, knowing this has not prevented us from attempting to improve the efficiency and trajectory of our aim. The industry was asked to simplify the product, and much good has been accomplished—both in terms of product structure and benefits to accomplish that goal. However, I am hard-pressed to find any direct evidence of substantial premium growth resulting from our efforts. In addition, innovations in benefit design, from “shared care” to step-rated inflation protection, appear to have met with similar success. We understand price matters, and recent consumer research confirms that even a small reduction in cost can dramatically open up the availability of potential sales. I’m just not sure that offering a stripped down, benefit discounted version changes the objective of the sale or will substantially alter results.
There also seems to be a myopic fairy tale working its way through the popular marketing culture that the benefits of the Pension Protection Act have somehow already solved all our problems. We’ll just magically paste the perception, and sometimes reality, of long term care benefits onto any financial instrument that moves. If the primary issue is pricing, forgive me for observing the obvious: Combo policies providing combo benefits generate combo pricing. And any newcomers to our target practice may have joined us only to be helping us shoot at the wrong target. There is absolutely nothing wrong with evaluating the financial risk and determining who wants to pay in the event of adverse circumstances. It’s just that we continue to have only one target focus to replace the risk as much as possible with insurance.
There is another target. One that in many ways is even more important. What if what we need to care about most is granting as many Americans as possible a safe, dignified, non-regimented and government-free “care receiving” experience. Our more affluent clients can and will continue to buy as much coverage as possible and transfer the risk. Co-insurance is for everyone! It’s just that it needs to be aimed at two targets: 1) a risk paying strategy between the insured and the insurance company, or 2) supplementing the cost of the risk by strengthening reserves to maintain personal control of the claim. The cost of defending freedom of choice and maintaining quality of care is clearly much less when your goal is to supplement, not prevent, the cost of the claim. Leaving this world at the mercy of a sterile government bureaucracy or in fear of inferior caregiving alternatives must never be an acceptable goal. The question that has not been properly targeted is not how much insurance is needed at a discount, but how little is needed to guarantee that the wrong “others” will not be making decisions for your customers.
Other than that I have no opinion on the subject.
