Long term care insurance – forging ahead with a new sense of confidence
In years past, producers grew anxious with all of the changes in the industry – numerous pricing changes and rate increases, benefits disappearing on new products, carriers exiting the business. Today, things seem to have stabilized. Rates seem to have stabilized, new carriers have entered the market, and carriers (and producers) are discovering innovative ways to solve the LTC problem.
The big news for agents and brokers selling the product is that the pricing finally seems right —which means it is now affordable when coupled with a reasonable policy design.
The reason for the change, says Minnesota’s LTCI expert, Deb Newman, is the maturity of what was a comparatively new type of insurance. Back in 2000, for example, pricing was based on 428,198 policy years of data. In 2014, that number was nearly seven million. “There is simply much more data available on which to base pricing,” Newman pointed out. Another miscalculation contributing to the initial underpricing, was a misjudging of policy retention, which a decade and a half ago was projected to be 95 percent. It turned out to be 99 percent. “Think of it this way, in ten years’ time, instead of 63 percent of buyers maintaining their policies, 91 percent have”.
Carriers seem confident too. Thrivent Financial not only re-entered the market, but for the first time ever, has made their product available through brokerage distribution through an exclusive arrangement with Newman Long Term Care. Likewise, this July, National Guardian Life, entered the business with an innovative “reverse combo” concept and the re-emergence of an unlimited benefit. John Hancock has launched a new pricing concept with a product that re-prices every single year based on the company’s actual performance. With a unique crediting program, their premiums could even decrease over time based on how well the company does. Linked benefit (combo) products and life insurance with LTCI riders have also become a fast-growing part of Newman Long Term Care.
LTCI has experienced similar growing pains to what DI went through years ago. Newman points out that hundreds of disability carriers eventually narrowed down to about a dozen carriers focused to the industry. The same has happened now with LTCI, Newman says, with many of the main players now having the strength and stability offered by fraternals and mutual companies.
“Moreover,” said Newman, “80 percent of the care today takes place in private homes.” Successful agents are now designing plans with a smaller benefit that carry a lower premium, which is more in line with what people want.” That is also why carriers such as Thrivent, Mutual of Omaha, and John Hancock are becoming more active in the market, with their lower inflation levels.
That observation is echoed by Bill Comfort, a St. Louis-based LTCI expert, who recently participated with Newman in an audio CD called “Clearing the Hurdles” directed at overcoming objections to the sale of LTCI by using stories and strategic questions.
Comfort points out that the industry has been selling “Mercedes Benz-type” products when a “Chevy Malibu” might have worked better. “For example,” Comfort says, “a three-year benefit period might be preferable in many instances.” He cited his a prospect who expressed concern over a plan with such a short duration. “What if I get Alzheimer’s and only have three years of coverage?,” he asked. The proper response, Comfort noted, is “what if you get Alzheimer’s and don’t have any plan?” Comfort emphasized that a three-year window would provide an opportunity to reposition financial assets.
With the product now properly priced, Newman said, the reasons for buying are as valid as they were when the coverage was introduced. “Having sold 25,000 policies allows us to see the claims side of a client’s journey”, says Newman. “If you heard their claims stories, you would immediately buy the product.”
There are pluses as well for those yet to use the benefit. Newman described the case of woman of modest financial means who bought a policy for herself, relieving her worry that she would become a financial burden to her children if she did not. “This gave her,” Newman noted, “permission to spend her savings and gifting to grandchildren during her lifetime.”
Similar benefit occurs at the other end of the financial scale. Newman described the case of another woman whose wealth was in the $30 million range, certainly adequate to self insure. She bought LTCI, she revealed, because if she became incapacitated she did not want her heirs skimping on her care in order to preserve their anticipated inheritances.
For a free download of Bill Comfort and Deb Newman’s audio program, visit www. newmanltc.com/hurdles