Conducted by the Agent's Sales Journal and the American Association for Long-Term Care Insurance
For this year's Long Term Care Insurance Market Study, the Agent's Sales Journal partnered with the American Association for Long-Term Care Insurance (AALTCI), the nation's leading independent organization dedicated to professionals in the LTCI marketplace, to conduct our most comprehensive producer study ever.
We surveyed more than 1,000 insurance professionals across the country and asked them about their experience selling LTCI -- the challenges they face, the opportunities they perceive, the expectations they have of their insurance company and marketing organization distribution partners, and more. The results reflect responses from personal producing agents who have sold at least one long term care insurance policy in the past 12 months.
We also asked agents to rate 15 of the largest LTCI insurance companies in 12 different categories, including the company that best meets an agent's overall needs in this market. Respon-dents were asked to rate only those companies they were currently appointed with to sell LTCI, and the top five companies in each category are represented in our report card.
Following the market study is the Agent's Sales Journal's 2nd Annual LTCI Selling Guide, designed to help you with every facet of the LTCI sales process. Whether you're an LTCI specialist or have yet to close your first sale, the purpose of the guide is to help you hone your skills with product knowledge, market insight, and sales tips from some of the industry's most highly regarded authorities on LTCI.
Market barometer
Many in the long term care insurance industry have been scratching their heads trying to figure out why the market has not yet reached original expectations. Companies routinely enter and exit, sometimes only to later return to the business. Actuarial pricing assumptions of the past turned out to be inaccurate, and policies have been marred by unstable premiums. Despite this rocky past, producers are optimistic about the sales potential they perceive in this relatively young, slowly maturing market.
Nearly one in three (32 percent) producers active in the LTCI market report an increase in sales activity during the past 12 months. Even more encouraging, 70 percent expect their sales to increase during the next year.
"This study bears out what we've been hearing from our association members . . . that sales of long term care insurance are ahead of the prior year and that, for the first time in quite awhile, insurance agents and brokers are highly optimistic about the future of market growth," says Jesse Slome, executive director of the AALTCI. "These producers echo the association's projection that the market for long term care insurance will grow from the current 7 million policyholders to some 14 million within the next five years."
A large number of the producers who experienced heightened sales activity in the past year attribute the growth to an increase in their marketing efforts, combined with more awareness among consumers about the need for LTCI. "I began selling the concept of LTCI to children of the elderly," said an agent in Minnesota who specializes in the worksite market. Her marketing efforts concentrate on her clients' "need to see that their parents have a plan in place before they have the need to dissolve their assets."
There are a number of converging factors contributing to producers' favorable sales expectations. Among them is the massive wave of boomers approaching retirement, many of whom are shouldering the burden of caring for their own parents and are receptive to any solution that would help them avoid inflicting the same burden on their own children.
One independent agent from New Jersey, who just sold his first policy this year, plans to be very active in the market over the next year. "The reason that I am selling it actively is that my clients are now asking for it," he explains.
Many producers report a growing awareness among consumers about the need for long term care coverage. As an independent agent from Port Charlotte, FL put it, "More people are becoming more educated about the need for LTCI. With people living longer and the cost of care increasing, LTCI policies become more valuable."
One agent in Tennessee who has been in the business more than 20 years attributes the growth in his LTCI sales to the role the government is taking to promote LTCI. "The impact on Medicaid, if we do not increase our own budgeting for our own LTC, will collapse the system," he says. "LTCI is a great product whose time has come, and the partnership laws . . . are a wonderful incentive."
Another agent capitalized on this year's Medicare Part D deadline to meet with more prospects to discuss retirement planning and the risk that long term care needs posed to his clients' retirement savings. Many of those meetings resulted in discussions of LTCI. "The worse Social Security looks to them, the more they seem interested in the product," another agent noted.
Still others report a spike in sales activity caused by the new Deficit Reduction Act, signed into law by President Bush on Feb. 8, 2006.
The legislation effectively tightened the rules on Medicaid planning, thereby making LTCI a more attractive option for many consumers.
Producer obstacles
The top three obstacles producers face are sales challenges: Clients perceive the product as too expensive (82 percent), clients procrastinate (50 percent), and clients don't recognize the need for LTCI (49 percent).
In some cases, producers are creating their own problems by using antiquated sales approaches, according to Gary Katelman, national sales director for LTCI with Senior Market Sales in Omaha, NE. "Some agents are still using the spreadsheet approach when meeting with clients. Spreadsheets don't sell LTCI," says Katelman, who notes that there's a shift taking place in the way LTCI is sold.
When talking about LTCI, agents who focus on the typical scenario involving nursing home confinement are missing the larger picture. "LTCI should be positioned as the glue that holds a retirement plan together," says Katelman. "It's an essential planning tool to protect the assets people have spent their entire working adult lives building."
Given that cost is the number one sales barrier, there are a number of strategies producers use to lower premium levels, the top two of which are extending the elimination period (33 percent) and shortening the benefit period (32 percent).
"One of the most interesting survey questions asked what policy change a producer would first recommend to reduce the cost of insurance protection," notes AALTCI's Slome. "In recent years, the traditional answer would have been the daily benefit or removal of the inflation protection option. Clearly producers now understand the importance of inflation protection, and more are aware that a shorter benefit period or longer elimination period are better approaches to meeting client needs for affordability. They are taking the 'something is clearly better than nothing approach,' and it's working for them."
The fourth most common challenge facing LTCI producers, the insurance agent's perennial challenge, is finding qualified prospects (29 percent). The two most effective prospecting methods for LTCI sales are referrals (41 percent) and cross-selling to existing clients (35 percent).
One common way to generate referrals is by developing strategic alliances. Indeed, many of the producers who reported an increase in sales activity this year attribute the growth to a strategic relationship forged with other financial professionals.
According to Slome, "The past 12 to 18 months have seen an important shift in the techniques utilized by dedicated long term care insurance specialists seeking prospects. Direct mail, traditionally the most effective primary source for LTCI leads, is being replaced by creating strategic alliances with financial professionals and other insurance agents. This is highly important information for producers looking to gain access to prospects and build their markets in the next 12 to 18 months. Strategic alliances take time to establish, but once in place, they yield results for long periods of time."
The most popular professionals to partner with to generate LTCI referrals include accountants (30 percent), insurance agents not actively selling LTCI (25 percent), financial planners (21 percent), and elder law attorneys (19 percent).
"Accountants have long ranked as the leading source of referrals for long term care prospects," Slome says. "However, the study clearly shows that producers are increasingly successful when partnering with financial planners and elder law attorneys. I suspect that subsequent surveys will demonstrate these two areas will grow in their significance."
The most striking difference between how LTCI specialists answered the questions versus non-specialists is in the area of prospecting. Specialists are more likely to rely on a referral system (49 percent versus 39 percent) and even more likely to form strategic alliances with other financial professionals (83 percent versus 59 percent).
Consumer habits
If you're looking for clues on what drives a prospect's purchase decision, the main factors that lead prospects to buy LTCI coverage are the desire to avoid becoming a burden to their family members (41 percent), asset protection (24 percent), and preserving one's independence (14 percent).
According to Katelman, there are two things that motivate a prospect to buy LTCI: First, they've developed a chronic health condition, in which case it's too late to qualify for coverage. Second, they're facing an issue in their own family, many times involving a parent. "When that happens," Katelman says, "they become very motivated to buy because they've seen the devastation that can happen without proper planning, and they want to avoid it in the future."
Despite the fact that the number one challenge producers face is that clients perceive the product as too expensive, products that allow for in-home care are much more important to clients than cost when evaluating a policy (36 percent vs. 16 percent). This does not surprise Lynn Devitt, a long term care planner with Newman Financial Services (Minneapolis) who was recognized as the country's top LTCI producer in 2005. "Home is where care is going, and the market is responding," says Devitt. "Companies have gotten very creative in developing products that allow policyholders to stay at home longer."
What does concern Devitt is that policies offering inflation protection scored so low (3 percent) in importance to clients. "It's the advisor's job to educate clients about the need for inflation protection in every policy they sell."
Policies with a high degree of flexibility (14 percent) and that are easy to understand (11 percent) also prove to be important factors for clients.
It is interesting to note that almost one-third (29 percent) of survey respondents currently have a client receiving LTCI benefits. Psychologically, when an agent witnesses firsthand a client going on claim, it can be a powerful sales motivator. As Slome points out, "Consumers who have experience with a family member or loved one needing long term care are significantly more likely to understand the need for insurance protection. Likewise, an agent witnessing what happens when a client benefits from their LTCI policy is far more likely to be both passionate and knowledgeable about the issue."
Distribution partners
Respondents are contracted with an average of 3.7 LTCI companies, though most (86 percent) write the majority of business through one or two companies. The most commonly listed needs from insurance companies include leads (36 percent), a simpler application process (34 percent), products that are easier to understand (27 percent), an easier underwriting process (27 percent), and premiums that are more stable (26 percent).
Barbara Hanson, a California agent who specializes in long term care insurance, has noticed improvements in underwriting, which "is no longer such a mystery," but says she would benefit from better marketing material, such as "better product brochures telling the whole story of the benefit to the client and the family" emphasizing how LTCI will improve the quality of life for both.
"When I leave with the application, they will want to read it and feel good about their purchase and future. There could be personal claim stories in there on 'how it worked for me' from actual claimants," continues Hanson, who is pleased with the companies she works with but complains that "some companies do not even provide an ID card with their phone number on it for the client."
Respondents broker their business through an average of 1.5 marketing organizations, and most find the sales support they receive from their marketing organization to be very useful (39 percent) or somewhat useful (42 percent). Producers' needs from marketing organizations include leads (54 percent), better marketing and sales tools (34 percent), underwriting assistance (31 percent), more product training (24 percent), and access to multiple carriers (23 percent).
According to Tom Riekse Jr., executive vice president of marketing for LTCI Partners, a brokerage agency, an effective distribution model is in place to support producers, but there's a lot of room for improvement. "The industry's lagging a few years behind in terms of application and underwriting efficiency," says Riekse. "It should be easier for a producer to place business." Riekse explains that the process is improving but, until the relatively young LTCI industry fully matures, one of the most important services a wholesaler can offer is assistance with the underwriting and processing of business.
Poised for growth
As the study's respondents attest, now is a good time to be selling LTCI. The boomer market, which is largely uninsured, has now reached prime purchasing age for LTCI at a time when many societal and legislative factors are contributing to a growing awareness of the need for consumers to take responsibility for their own health care needs.
In addition to training, producers who want to capitalize on this opportunity will need to develop their own marketing and prospecting systems. One of the most common methods that experienced LTCI specialists use is to develop a referral system by forging strategic alliances with other financial professionals.
From learning the basics to targeting niche markets, the LTCI Selling Guide that follows will help you make the most of this opportunity.
In June and July, the Agent's Sales Journal, in partnership with the American Association for Long-Term Care Insurance, surveyed more than 1,000 licensed insurance professionals across the country. The names were selected from Agent Media's LTCI Select Database*. Producers were invited by email to take the survey. The survey results reflect answers from personal producing agents who have sold at least one long term care insurance policy in the past 12 months.
Methodology
The survey was conducted in two parts. The first part focused on producers' specific experiences in the marketing and selling of LTCI. Over 700 producers completed Part One. The second part explored producers' attitudes toward and preferences for LTCI insurance companies. Over 700 producers completed Part Two. There was some overlap in survey populations in that some individuals completed both parts of the survey. The two surveys were conducted online at separate times.
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Jamie Green is editor-in-chief of the Agent's Sales Journal. For more information on this and other studies, call 800-933-9449 or email editor@agentmediacorp.com.
