Several trends have propelled the recent popularity of long term care insurance policies, including an expanding senior market and an LTC awareness campaign by the federal government.
You might assume the more people who hear about LTC the better--because a lack of education is the most important hurdle facing the LTC insurance industry today.
But where people learn about LTC does make a difference. An uneducated agent can do more harm than good, both to the industry and to customers.
After all, LTC is not just a financial sell. Its an emotional sell, and LTC customers can be very vulnerable. More and more aging baby boomers want to maintain their independence as they grow older, while not becoming a burden to their children. They want to ensure theyll have quality care throughout the rest of their lives while protecting their assets. So they are looking for someone to help them.
Unfortunately, most of these customers will turn to the same insurance agent who provides them with policies for life, home, and property and casualty insurance, etc.
Thats like going to your primary care physician to be treated for a brain tumor. When you want a detailed diagnosis and treatment plan, you should see a specialist.
The generalist agents are often good at what they do. But they fall into the category of what I call the "casual" LTC produceri.e., one who sells LTC only now and then.
The problem they present stems from this: Someone who is seeking LTC insurance needs to meet with an LTC specialist, not an insurance generalist. LTC is a very complicated and technical product that needs to be explained by a person whos knowledgeable about the specific policies. Benefits, definitions, and prices can--and do--vary. A generalist cannot possibly stay abreast of all of this detail and also address unique LTC needs.
Furthermore, insurance generalists who dont fully understand the components of LTC many times default to the only aspect thats familiar to them: price. If customers make LTC decisions based on price alone, they are being blindly led down an uncertain path.
This is a real disservice to customers. Anyone who makes a decision to buy an LTC policy deserves more. They deserve a visit in their home from an LTC specialist who can explain every facet of the policy and also listen to the customers needs.
Thats important, because buying LTC is not an issue buyers want to take lightly, nor decide too quickly.
The spark that fuels my concern about the casual producer is the boom in the elderly population.
Baby boomers, the 76 million Americans born between 1946 and 1964, are retiring or preparing to retire in record numbers. The U.S. Census Bureau states that boomers are turning 50 at a rate of one every eight seconds. Many are already caring for an aging parent, so it has become vital to them to secure their own future before they reach their senior years.
While this trend has opened up a whole new audience and selling opportunity, it has also magnified the risk that consumers may find themselves turning to casual producers for their LTC advice and direction.
It is evident that such consumers need LTC education, of course. According to a December 2001 study published by American Association of Retired Persons, 31% of people polled, aged 45 and older, said they had insurance that would cover the cost of a LTC stay in a nursing home. However, the Health Insurance Association of America estimates that just 6% of Americans have actually purchased LTC policies. And although Medicare does not cover LTC stays at nursing homes, more than half of those polled, including those who say they are "very familiar" with LTC, believe Medicare will cover the cost of a long-term stay.
Whose responsibility is it to educate customers about their LTC exposure and the insurance thats available to cover it? In my view, the responsibility belongs to the LTC insurance industry, professional organizations and LTC specialists, and the federal government--not the casual producer.
In some ways, casual producers have helped the LTC industry. They have encouraged carriers to be more aggressive. They're driving prices down with competitiveness. So, in this sense, they are "friends" of the LTC industry.
But some of them are also "foes." They hurt customers, for instance, if they arent knowledgeable about their product; if they dont know the product benefits, differences in carriers and differences in fundamental options; if they steer customers toward bad solutions; or if they undersell an LTC product because they default to simple determinants such as price.
is president of Long Term Preferred Care, Franklin, Tenn. He may be emailed at firstname.lastname@example.org.
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 21, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.