Admit it -- trying to convince people to buy long term care insurance (LTCI) in the last six months has been anything but easy. According to LIMRA, overall sales of LTCI were down 23 percent in the fourth quarter of 2008.
It's even said that we've reached the point where some people question the future of the industry and desperately search for alternatives to fund future long term care costs. However, there are several reasons to believe the business of LTCI will bounce back strong in the second half of 2009. Let's look at seven of them:
1. Economic stabilization. Of course, the primary reason for the disappointing fourth quarter in 2008 was the banking crisis. Although there is a long road to recovery, the "shock" of the initial situation meant that a lot of people put off the decision to purchase any new product, especially something like LTCI. LTCI is a product that is easy to put off for six months or so. Right now, there may be a pent-up demand for the product growing. In talking with other distributors of LTCI, they are seeing an increase in activity levels and conversations, which will inevitably lead to sales in the future.
2. LTCI is a mature, proven product. According to the AALTCI in their 2009 Sourcebook, there are more than 8.25 million Americans who own LTCI coverage and about $20 billion in estimated earned premium. During the recent economic downturn, when people were moving from investments to cash and canceling vacations, they continued to pay their LTCI premiums. Those who have purchased their policies are holding steady, meaning lapse rates are very low.
3. Claims are being paid. As a general rule, boomers do not trust the advertising pitches of financial institutions, which has never been truer than it is today. However, an educated consumer will realize that even in a worst-case scenario (i.e., insurers going into receivership) LTCI claims are still being paid and promises are being met. The state guaranty association system is working to assist those policyholders. Of course, state laws typically prohibit licensed producers from discussing the guaranty feature of state guaranty when recommending coverage. In my opinion, this prohibition is a good thing -- it means that consumers and agents need to pay attention to the financial ratings and strengths of carriers, and reward those that have managed their business conservatively.
4. Multi-life plans are becoming easier to implement. Almost every LTCI company now has employer-based long term care policies for sale. Many of the new products offer cutting-edge features such as online applications and terrific educational materials. Expect more employers to offer these easier-to-install plans to employees.
5. Required producer training. As of January 1, 2009, almost 29 states have implemented a version of the National Association of Insurance Commissioners (NAIC) required LTCI training. The training normally consists of eight hours of exclusive long term care training with an additional four hours every two years. Many companies are sponsoring subsidized courses and providing expert trainers. Typically, those advisors experiencing the better classes are energized about the product, the market, and have a new sales approach that will help them down the road.
6. Simple demographics. Remember that there are 78 million baby boomers, and 330 of them turn 60 every hour. It's no surprise that the majority of LTCI purchases happen between the ages of 55 and 64.
7. Personal experience and awareness. As boomers continue to face aging and health issues, they will want to chart their own path regarding LTCI. We can be sure the picture will not be the linoleum-tiled nursing home some might imagine, but instead something that blends home and community in a unique and personal way. LTCI is the best way to finance that vision.
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