Long term care: Strategies to increase client confidence in 2013
By Tom Riekse Jr.
Uncertainty is a hallmark of our current financial and political system. Even though there was a short term deal to avoid the fiscal cliff, investors are still uncomfortable with the stock market and gun sales are soaring well beyond the need for hunting and self-defense.
The need for long-term care (LTC) planning hasn’t changed, but the uncertainty continues on this subject as well. Some believed that the CLASS act plan that was part of health care reform would be the answer. However, that voluntary government program was recently repealed as part of the fiscal cliff negotiations and in its place a “long-term care commission” will be created. The 15 person long-term care commission will no doubt produce a lengthy report with recommendations that probably won’t be acted on.
Given the lack of trust, why would anyone trust a long-term care insurance company to fulfill its claims 20 or 30 years from now? Well, it turns out that, according to LIMRA, LTC sales are up 6 percent through the third quarter of 2012, and well over 200,000 Americans will purchase plans this year. So, who is this trusting person who is willing to spend $2,600 per year on LTC coverage? According to a Mutual of Omaha “Hearts and Minds” consumer study published in 2012, here are the characteristics of a typical buyer:
- She’s white and between the ages of 55 and 64
- She is married, college educated and has adult children
- She works in a white collar profession and isn’t retired
- She's a homeowner with 11-plus year in her current residence and lives in a town with a population of at least 250,000
- She's s affluent (household income of $100,000 annually or more) and is a planner interested in financial issues; owning life insurance and other conservative investment products
- Is family-oriented and has been exposed to LTC issues
- Generally skeptical and mistrusting of financial advisors and insurance companies
The bad news for those looking to make a quick sale is this type of information takes a long time to digest. In our experience as a LTC brokerage general agency, often, the time between someone learning about LTC insurance and buying can be five years or more. How can advisors build trust and credibility for LTC insurance to expand the market beyond the people who already know they want to buy? Here are some great ways to approach the market in 2013.
- Continually educate clients and prospects about the need for health care planning in retirement. There are myriad ways to provide meaningful content about this important subject. Whether you maintain a blog, create a monthly e-mail newsletter, do seminars or use other marketing initiatives, be sure to include material on LTC planning on a scheduled basis. Third-party organizations such as the American Association for Long-Term Care Insurance or the Life and Health Foundation can assist with good material to do that.
- Position LTC planning as a normal part of retirement planning. Instead of offering LTC coverage, set aside the time to discuss LTC planning — without discussing LTC insurance.
- When discussing LTC planning, consider all available options for funding a plan. After estimating the financial exposure to LTC based on the cost of care, consider different ways to fund a plan. Instead of leading with LTC insurance coverage, consider savings, Medicare, Medicaid, family members and any other possible sources of help along with LTC insurance. Then, consider the pros and cons of each type of funding.
- Explain the potential downsides of LTC insurance. Build credibility by discussing the apparent downsides to LTC coverage: the fact that if you don’t use the plan you won’t get your premiums back, that premiums may increase in the future and that you’ll have to go through health underwriting. Have a conversation about why these things are true and why what may seem like a downside on the surface actually helps keep premiums lower.
- Let the client ask lots of questions. Of course, before someone buys they will ask lots of questions. Since many advisors aren’t specialists in specific policy details, it often helps to partner with someone who is, and have them available through a conference call to help with those questions.
- Manage expectations on underwriting.If long-term care insurance is considered the best solution, always have a plan B if someone is declined due to health underwriting. For example, if a couple is applying for coverage, ask what would happen if one client was declined and explore how they would then fund their LTC plan.