Almost every industry understands the impact the senior market has on its business. From automobile to cellular phone sales, each sector offers products and services designed to cater to this lucrative demographic. With a growing number of seniors and pre-retirees, it's an important niche business.
For the insurance industry, it's even more critical to focus on this segment. Within the industry, entire companies, products, and practices are devoted to serving the needs of seniors. In fact, special designations and services are often utilized by agents whose production is based solely upon their relationships with current and soon-to-be retirees.
But whether you focus entirely on the senior market, establish it as an important part of your business, or want to expand into this segment, it's critical that you know your client. Just as working with seniors has unique benefits that can help grow your business, they also have specialized needs and concerns that must be addressed. And in this ultra-competitive market, if you don't meet those needs, someone else will.
To that end, the Society of Actuaries recently identified several of these concerns in its 2007 Risks and Process of Retirement Survey, with issues ranging from health care to income preservation and inflation. Following is a list of their most pressing concerns, along with expert advice for agents who currently or would like to serve the senior market.
#1: Inflation
For seniors, and even pre-retirees, the threat of significant inflation is no theory. They've experienced its effects first-hand.
"It's important to realize that retirees understand inflation because they've lived through it," explained David Macchia, president and CEO of Wealth2K and co-founder and director of the Retirement Income Industry Association.
The 1970s were a time of higher prices coupled with low growth, he said, and seniors know that a repeat scenario would threaten their lifestyle and assets.
But while retirees are aware of the effects of inflation, they don't necessarily know how to properly defend against it. Agents can provide a valuable service by offering solutions to these concerns, and rather than focusing on one product, Macchia said, agents should look for an effective combination that can effectively manage risk. He advocates a time-segmented strategy where a blend of fixed and equity vehicles work for the client as they move through their retirement years. The earliest period could involve an immediate annuity to provide guaranteed income as other assets are earning progressively higher rates of return. As time passes, more annuities could be purchased to continue the income stream, but with inflation hedges resulting from the additional interest earned while they were left to grow.
#2: Long term care
Long term care is an understandable concern for seniors, since they're living longer and are likely to need it at some point in their lives. But according to Jesse Slome, executive director of the American Association for Long-Term Care Insurance, the senior market can be a tough one for LTCI agents.
"For seniors, the opportunity (for agents) to sell long term care insurance is increasingly hard," he said. The cost is often prohibitive, he said, and as clients age, they are more likely to be declined outright or fail to qualify for good health discounts. Some protection for these clients is better than none at all, but seniors don't have to be the main focus for a successful LTCI agent like they were several years ago.
In fact, the market for the product is changing and agents need to be aware of and adjust to those changes. "The marketplace today and the approach to the marketplace today is entirely different than it was as (recently) as two years ago," Slome said. Baby boomers who are getting close to retirement are now strong prospects for this type of insurance, and agents need to stress the need for long term care planning early on.
Slome suggests that your sales tactics reflect the kind of prospect you're likely to meet in this demographic. Instead of using a fear-based approach, agents should focus on the risk clients face from an asset standpoint and the value of insuring that risk as they would any other. Slome said that insurance companies are also adapting to the market change and releasing products designed to attract the pre-retiree market: Some allow a client to purchase a moderate amount today, and purchase more later without having to health qualify again.
While most consumers know a little bit about long term care insurance, there are also many misconceptions that an agent can clarify. For example, many clients think long term care insurance is primarily for nursing home care.
Slome said the industry bears much of the responsibility for the confusion by not marketing the product properly and promoting the real data behind long term care claims. In fact, according to AALTCI's 2008 Sourcebook, fewer than 25 percent of individual claims paid went toward nursing home care last year, while about 43 percent went to home care and nearly 33 percent went toward assisted living care. If you can explain that this insurance covers care that can keep clients out of a nursing home by covering more attractive options such as home or assisted living care, you can widen the appeal of LTCI and help allay a significant concern in this market.
#3: Outliving assets
With people living longer and an economy that is threatening retirement savings, outliving assets is an understandable concern among seniors and pre-retirees. Many of them don't have the benefit of a large 401(k) or pension plan, so Social Security and smart planning are keys to their retirement stability.
"Seniors know they've got to make every penny last," explained Jim Summers, president of Senior Market Sales, a senior-focused marketing organization. As an agent, you can ingratiate yourself with these clients by taking an honest inventory of their situation and developing a plan for their assets that suits their financial and risk profiles.
Summers said that many seniors have opportunities to improve their financial situation but don't take advantage of their existing resources. An objective assessment can reveal assets that aren't working as hard for them as they could. "A lot of people really don't believe they have a lot of money, but if you sit down and really walk through what they spend their money on, how they have their money set up to be able to provide for them in the future, sometimes they find out that they're a lot better off," Summers said. A bank CD or other savings vehicles might earn a low interest rate and could provide more income or growth to help their money keep up with their lifespan.
He also said that retirees might hear bad news about the economy and over-estimate its effect on their personal situations. While high gas prices have a negative effect on most budgets, seniors tend to drive less so its impact might be minimal compared to someone who drives to work every day. Developing an honest assessment of their current situation is an important step in successful planning and easing their fears about the future.
#4: Health care/medical expenses
With rising costs and an array of potentially confusing options, adequate health care coverage is an important concern among retirees and pre-retirees.
According to David Staehling, owner of Staehling and Associates, agents need to demonstrate that they have the knowledge to explain the differences between Medicare's different parts, Medicare supplements, and Advantage plans.
"A good marketing agent needs to be educated as to the pros and cons of those choices," Staehling said. They also need to communicate those differences effectively so the prospect can make an educated decision, he said.
Staehling warned against simply trying to lower a client's cost without disclosing the effects of those changes. An honest evaluation of all options should include lost benefits that accompany a lower cost. "If your premium is $300 a year less, you'd better be able to tell that client what he's losing. He may be saving on premiums, but what is he losing in benefits to make that change?" Staehling said.
Demonstrating that knowledge will help build confidence in the agent-client relationship, and when you back it up with the right product, you can provide a valuable service and increase your business. Seniors and pre-retirees know that they have to make decisions about their health care, so they're already interested in your products. Their valid concerns can be a valuable opportunity for the informed agent.
But Staehling cautioned that competition is strong in this area. "They don't reach that stage without getting 20 or more pieces of marketing materials from competing insurance companies," he explained. Agents can expect these prospects to receive phone calls, brochures, and even invitations to seminars and dinners from companies wanting their business. Clients can become anxious about these important decisions, and the successful agent will invest enough time in addressing their concerns, reviewing pertinent materials, building a relationship, and finding the right solution for each situation.
#5: Loss of spouse
According to estate planning attorney Bill Thedinga, a partner with the law firm of Weld, Riley, Prenn & Ricci, the ramifications of losing a spouse should not be underestimated. "For most clients, it's the most significant life-changing event that they ever have," Thedinga said. "Everything changes at that point." In addition to losing emotional support, the surviving spouse faces significant financial decisions and potentially significant lifestyle adjustments.
While determining the appropriate financial strategy is critical, Thedinga explained that agents need to recognize another significant concern: the challenge and frustration that accompany filling out paperwork. "Anything you can do to reassure them that the claim process is quick and goes smoothly is helpful, and any assurance that you'll be there to be part of that process is always reassuring to a client," he said. Considering that the surviving spouse will have to deal with the claims process during a time of great stress, you can gain valuable trust by promising to walk them through each step -- especially if the survivor has little experience handling family paperwork or finances.
Finally, while losing a spouse is a common concern, it might not be vocalized on an appointment. Couples are often uncomfortable talking about the death of one spouse with the other trying to survive without them, and they rarely calculate the pertinent numbers related to those needs on their own. Thedinga said that agents should be willing to raise the issue and address any questions or concerns the clients express. Gathering and organizing important data can also help the clients if and when they need to see an estate planning attorney for further guidance.
Thedinga believes that if you can address the entire spectrum of clients' concerns regarding a loss of spouse, you can separate yourself from your peers and help build a successful and lasting relationship. "Agents who are really doing the job for the customer are not only talking the numbers, but (also) helping with the planning process," he said.
When serving the senior market, it's essential to not only understand the challenges faced by these individuals, but also the solutions available to help them meet their needs. Whether it's loss of spouse or asset protection, health care or long term care, the agent who can help seniors navigate their future and current financial and medical needs will enjoy the most success, and develop an invaluable rapport with their client base.
Michael Murillo is a freelance writer and frequent contributor to the Agent's Sales Journal. He can be reached at vivamurillo@hotmail.com.
