Creating value and avoiding LTCI sticker shock
By Matt McCann
The agent shows his or her recommendations to the prospect and the prospect starts to focus on the cost — cost of the premium, not the cost of current and future care and the impact that would have on their loved ones.
So, you're making more dials, handling objections on the phone and making appointments, only to get the following response: "Well Matt, you really did a great job. Matter of fact, maybe the best presentation we have ever seen. You sure did give us a lot to think about and we promise we'll call you when we have made a decision or have any questions."
They never call back, nor do they ever answer the phone again when you call them. Ouch! Where did I go wrong? If I really did that great a job, these clients would be filling out an application right now.
Did I really ask the right questions? Did I listen to the answers? Did I ask follow-up questions? Did I really mentally place them in a position of needing care and understanding the impact that it has on their family? Did I ask all the health and financial questions? Did I get them to agree that long-term care insurance was the best solution to their problem if they qualify based on health? Did I explore their answers and probe some more?
Sometimes, we do a good job and we still get: "What a great presentation, but we have to think about it." What the heck do they need to think about, anyhow? They don't really need to think about whether they want to be a physical, emotional and financial burden on their family, do they? Do they really have to think about if they would rather spend their own money on long-term care that could run hundreds of thousands of dollars, instead of buying this policy?
So, what is the problem? How do some of the top LTCI producers place so much LTCI? Our top producer for 2012 placed over $500,000 in individual long-term care insurance (358 applications with a placement rate in the high 70s). There are other top names around the country who routinely place $200,000–300,000, or more, every year.
There are secrets some of these top professionals share. Sure, they work full time. (How many people in our industry really work full-time?) They understand the products. They have lead sources and referrals. Some meet with prospects in their office, the prospects' homes or via the Internet. Why are they enjoying success, when many of us are not?
Part of the problem may be that many times, agents create sticker shock for their prospects, which may cause the prospect to respond, "I have to think about it," even though you may have created need and urgency. The agent shows his or her recommendations to the prospect and the prospect starts to focus on the cost — the cost of the premium, not the cost of current and future care and the impact that would have on their loved ones.
Sure, sometimes this happens when an agent does not ask the proper financial questions. Agents say they feel uncomfortable asking such questions. I say it is their fiduciary responsibility to do so. How can an agent make recommendations about an asset protection product without knowing the amount of assets he or she is protecting? But it is more than just that: We really have to understand affordability and how that relates to the way our client makes a decision.
It comes down to the physiological impact a perceived high premium has on the client. Some agents (including me, when I was in the field) always recommend to a client two proposals, based on the information heard during the appointment regarding their concerns and their finances. The first proposal should be a very affordable plan, and the second one is the plan you think is the best option for the client. For analytical clients, perhaps show a third plan, which would be the luxury plan. For example, take a 57-year-old and 55-year-old couple in suburban Chicago. The "basic" plan might be a two-year, $3,000 a month plan (CPI or 3 percent compound inflation, depending on carrier). The second plan might be a five-year shared care, $4,700 a month with inflation. The luxury plan might increase the monthly benefit to maybe $6,000 or more. Your examples will depend on your location and the client with whom you are meeting.
You show the basic plan first. It is extremely affordable. It won't scare the client and will keep them paying attention. What happens is we sometimes scare the client half to death, not with the risk of needing care but with the premium. With today's economy, this becomes an even bigger concern. By showing the client a very affordable solution first, you can get them engaged without dismissing you altogether.
However, you must create value. You could do so by saying, "Mr. and Mrs. Smith, I have two great options for you. First, based on your health and age, I am recommending Mutual of Vegas. Now, I represent all the top insurance companies, so if you have a favorite, let me know, but Mutual of Vegas in your situation provides the best coverage at the best value." Remember, you are the expert.
You can explain that the first plan is a basic plan; it provides for $3,000 a month of benefits, a two-year pool of money (explain the pool) and inflation (CPI, 3 percent compound, etc). Now you show the value, "$3,000 a month will not cover all your long-term care needs. However, based on our current cost of home care, which is $17 an hour, $3,000 a month, in today's dollars, would provide you with 176 hours of home care each month. Do you think 176 hours of home care would help you stay in your own home and relieve some of the burden on your family?"
The client will say yes. You continue, "The second plan provides you with a lot more breathing room, which means it allows for more flexibility." You would make sure to explain to the client the monthly benefit, shared care, etc. "What that means to you, Mr. and Mrs. Smith, is the extra money would provide you with 276 hours of home care being paid for by Mutual of Vegas each and every month. That is 100 more hours every month than the first plan. That would certainly make sure you stay in your own home and allow your family to be loving and supporting without creating a huge physical, emotional and financial burden on them, don't you think? It would also make sure you can have a quality assisted living facility, if required, and help you avoid a nursing home, which you shared was important to you. Now, if you do have to be in a nursing home, you have the resources to pay for a quality facility." You need to repeat all of the concerns that they shared with you and explain how having a plan addresses those issues. Ask questions which can reinforce some of this information. For example: "If your mom had this plan, how would that have changed how your family was impacted by her stroke?"
You will see that many clients will talk you into buying more than the basic plan. They will say, "Matt, don't you think we really need more than $X a month in benefit?" You respond, "That is really a good point." Many times they will move up from your basic plan to the plan you really wanted them to purchase, or something in between.
When the client starts talking that way, you know they have bought into the whole idea of transferring the risk of long-term care with LTCI, making this a solid sale. You, as the agent, also don't come across as a car salesperson having, to continually lower your original plan to meet their price point, assuming you were even given the chance to do that.
The point is that we create value, after developing need and urgency, all without scaring the client with a high premium. This does not mean we just sell small policies. We just have to be aware that we can't scare the clients with a high premium as the first option we show them. If you are having problems getting the application, one of the reasons could be that you are showing them plans they can't afford or that they don't understand the value of having the plan in the first place.
Words have meaning and impact. Perception is everything. Sometimes, you hear agents saying to their clients things like, "I know long-term care insurance is expensive." Why would anyone ever do that? Who says it is expensive? Expensive compared to what? An agent should always say, "Long-term care insurance is very affordable and can be designed to fit your needs and budget. It is also much less expensive than paying for your future care yourself." Not to mention the other benefits that create value, in addition to paying for care that exist in a good LTCI policy.
Now, go help someone, ask questions, listen and write an application or two.