Third annual Agent Media, AALTCI study offers glimpse into business of industry's producers
The long term care insurance market has changed dramatically since the product's inception in the 1970s. Originally designed to cover only nursing home care and complement existing Medicare coverage, LTCI has blossomed into a flexible, often feature-rich offering meant to cover those expenses that Medicare, Medicaid, and standard health insurance will not. It's also expanded into the assisted living and home care markets and begun covering several levels of service for those who need it.
In the 2008 Long Term Care Insurance Study, conducted by Agent Media* and the American Association for Long-Term Care Insurance (AALTCI), producers speak out for the third year in a row on their experiences in and opinions on the long term care insurance market.
While half of producers say their sales have remained level over the past 12 months, 33 percent indicated an increase in production. (Chart 1)
Jesse Slome, executive director of the nonprofit AALTCI, said positive media coverage has contributed to this uptick and, in fact, said he's noticed more consumers going directly to producers and more agents simply selling policies over the phone and via mail. The LTCI sales pitch, he said, while not without its challenges, is becoming easier thanks to this increased awareness.
Others say that awareness comes from the growing firsthand long term care experiences of the baby boomer generation.
"People in their 50s and 60s are experiencing their parents' long term care situation and they want to be prepared for their own, especially when it comes to asset protection," said one producer from Northport, NY who sold more than 20 policies in the past year.
Many of the agents who said their sales have decreased in the past 12 months (17 percent), however, blame their reduced sales on the economy.
"I believe that the current economic situation has forced even greater numbers to shy away from the extra added expense of LTCI, even though they may actually see a rising need," said a New Jersey agent.
Looking ahead at the next year, producers are largely optimistic, with 66 percent predicting an increase in sales and 30 percent expecting their numbers to stay about the same. "The senior population is growing," said one agent from Palatine, IL. "More and more people are becoming aware of the fact that they need to protect their assets not only for themselves, but also for their children." (Chart 2)
Slome added that he believes the industry will begin to do a better job of telling the stories of those now receiving claim payments. Once consumers begin seeing the benefits reaped by those who have purchased this coverage, he said, the need for the product will become more real than hypothetical and more consumers will be willing to purchase coverage.
Your selling habits
One significant change that's occurred in the LTCI market over the past few years is the typical buyer has become younger. In Agent Media's 2006 study, 48 percent of producers were primarily selling to those aged 59 and younger. This year, 54 percent reported that the majority of their sales are being made to those in that age bracket, with the next largest group selling to those in their 60s (41 percent). (Chart 3)
This shift, said Slome, has necessitated a slightly different marketing tactic on the part of producers.
"The whole planning discussion has changed from catastrophic nursing home planning to retirement asset protection," he said.
Producers also indicate that selling to existing clients is among their most successful prospecting techniques (41 percent), with referrals coming in second at 38 percent.
According to Brandon McDowell, president of the full-service IMO American Insurance Marketing Group, the LTCI industry has been steadily shifting to a referral-based market, with all types of professions -- including CPAs and estate planning and tax attorneys -- getting involved.
That atmosphere is reflected in the partnership habits of LTCI producers -- 65 percent partner with some sort of outside professional in order to generate referrals, with 27 percent of those who partner aligning themselves with other agents who do not sell LTCI, 25 percent with accountants, and 23 percent with elder law attorneys. (Chart 4)
"Agents who are most successful in this business have done two things," said Slome. "They have partnered and they have specialized."
Why do your prospects buy?
According to 41 percent of producers, the primary factor leading prospects to purchase LTCI is to avoid becoming a burden on family members. Asset protection is the second-most important factor (26 percent), with "peace of mind" at 12 percent. (Chart 5)
Colleen Goldhammer, senior vice president of long term care insurance independent sales for Genworth Financial, said it's important to focus on the potential impact on family members when selling LTCI as they will be more affected by a long term care event than the policyholder.
"Families take care of one another," she said. "The question is, how will that care impact a family and their finances? It rarely brings a family together, but it can tear them apart."
And when asked what factor is most important to clients when they evaluate an LTCI policy, 33 percent said consumers look at policies that allow them to stay in their own home for as long as possible. Fourteen percent each also chose flexibility, low premiums, and easy-to-understand policies. (Chart 6)
Slome said the industry has begun to respond to the need for flexibility and affordability with products that go beyond the "one-and-done" planning approach, as he calls it -- in other words, by developing solutions that can be changed and added onto as the consumer ages. Goldhammer also pointed to increasingly popular options such as zero-day elimination periods for home care, reduced-premium products, tax-advantaged offerings for business owners, LTCI combination products (bundled with either life or annuities), and return-of-premium riders for those concerned they will not use their policy. (See "What Are You Selling" to learn about what product options agents are selling most.)
"Product designs have pretty dramatically changed," said Slome, "in some cases to drive the change in the marketplace, and in some cases as a reaction to the marketplace."
What are your challenges?
The top five challenges named by producers selling LTCI are that clients perceive it as too expensive (76 percent), clients procrastinate (50 percent), clients don't see the need for it (39 percent), underwriting problems (27 percent), and finding qualified prospects (26 percent). (Chart 7)
In addition to taking advantage of new affordable product solutions and health and spousal discounts, experts advocate an approach that emphasizes the value of an LTCI policy relative to its cost when facing a client who finds the coverage too expensive. Part of the problem, said Slome, is the industry often quotes "average" costs that are actually higher than what half the market is paying, effectively pricing out 50 percent of willing consumers.
While the market is now at the point where more consumers than 10 years ago are aware of the need for LTCI coverage, Slome said, it's now incumbent upon agents to deliver the message that this coverage is also affordable.
"This can't be done in one press release or effort," he cautioned. "Over the years, we will have to tell the story about how this is affordable and how to right-size a policy so it meets [the client's] needs."
Procrastination is also a frequent complaint, but Jim von Bruchhaeuser, executive vice president and chief marketing officer for Penn Treaty Network America, said producers who can show their prospects and clients how this coverage will benefit them today -- not 20 years from now -- will be most successful in this area. Rather than employing scare tactics and telling stories of nursing homes and reduced care, focus on the protection of lifetime income and the idea that applying later, rather than sooner, could mean a complete denial of coverage.
The same applies when dealing with consumers who don't see a need for coverage at all, he said.
"[In the old days,] everyone had a story about how grandma was in a nursing home and had to sell her stockings," Bruchhaeuser said. "I can remember my first few sales talking to people like that and seeing a complete disconnect. Now, we're seeing successful sales growth away from that story."
Underwriting problems are sure to grow as medical science becomes more sophisticated and time unveils the eventual severity of certain conditions. More denials are now taking place, said Bruchhaeuser, which could cause problems for producers submitting substandard applications.
Slome, however, is unconvinced that underwriting is as big of a problem as agents believe it is. Protecting against risks is the nature of the industry, he said, and is necessary to keep industry premiums as low as possible.
"[Producers need to] bite the bullet and communicate earlier to clients about the need to health qualify for this protection," he said. "We as agents and as an industry can blame ourselves for the exact same thing we blame our prospects for -- agents procrastinate and are not aggressively educating clients in their 50s on how to qualify for health discounts."
As for prospecting, as indicated earlier, many producers are finding success with cross-selling and referrals from other professionals. Slome added that simple marketing is essential to ensuring that consumers know your services exist.
"There is no business in America that exists successfully without consistent marketing," he said.
The bottom line Kyle Metcalf, director of marketing for LTC HealthPlan Services, tells the
story of an agent whose client recently went on an LTCI claim and began receiving benefits.
"The agent got a phone call from the client's kids thanking him," Metcalf said. "The agent said it was as good or a better feeling than selling a life insurance policy because you're insuring somebody who's alive, and the kids appreciated it as much as or more than a life insurance policy."
As the market continues to mature and offer new product solutions, as the senior population continues to grow and require more long term care services, and as baby boomers continue to experience firsthand the need for long term care insurance when looking after their ailing parents, sales of this popular product are primed to increase.
"Agents need to be in the market no matter how frustrated they get," Metcalf said. "Right now, it may be a little tight, but the market will bust."
Christina Pellett is managing editor of the Agent's Sales Journal. She can be reached at 800-933-9449 ext. 226 or ASJeditor@AgentMediaCorp.com.
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