LTCI sales: Confessions: What the policyholders tell us
By Stephen D. Forman (LTCA)
Long Term Care Associates, Inc.
As a long-time marketer of LTC product solutions, there's no more compelling research to me than consumer studies. As my readers know, I've interpreted the last 15 years of AHIP's buyer versus non-buyer studies (see "The buyer you want"), and have shared Mutual of Omaha's "Study of Consumer Buying Habits" and John Hancock's "Study of Buyer Behavior" as eagerly as a comic book fan trades new issues of The Green Lantern.
Recently, I participated in a few research exercises and was provided access to a study whose findings have not yet been made public. Although the original presentation is confidential, I have obtained permission to paraphrase the results for you. As producers, you'll find value for your practice I'm sure.
Age of purchase
By now, we are all aware that the buyer's average age has plunged from the mid 70s during the 1980s and 1990s all the way down to the late 50s in the present day. But just as you learn to drive long before you officially qualify for your license, when did today's buyer actually start shopping?
It turns out that the time that elapses from first "becoming aware of the need for long-term care" through next becoming aware of what our insurance product is, then beginning to research and learn about it, to finally purchasing LTCI is an astonishing nine year cycle (with two to four years between each of the aforementioned steps).
As with all averages, some individuals do take longer or shorter than others. Fortunately for us, roughly one half purchase within one year of first beginning their research.
One takeaway for industry: It would be more efficient to target prospects closer to the end of this nine-year cycle than those who are just beginning.
Triggers to move forward
Whether someone was simply motivated to learn more about LTC, to actively research the carriers and products available, or to fill out an app to apply, a handful of common triggers re-appear which propel a buyer forward through each step.
By far, the top reason cited is consistently that, "Someone I know either needed LTC or was personally affected by it," which rings true until we consider that "I had to provide care" ranks relatively low, while "I personally needed LTC" is a non-starter entirely. Why does first-hand experience not lead to purchase, while hearsay does?
For those who've long advocated that our industry and trade groups pour more money into national advertising, you should know most buyers do not cite this as an important trigger (although this does not mean ads don't work). However, discussions with key, trusted individuals play a very important role, whether with one's financial planner, family members, friends or co-workers. This is not new. The power of recommendation and endorsement has been emphatically stated before. This may also help to explain why LTC insurance agents who blithely skip rapport building find themselves flat-footed when it comes time to close. Education
Consumers turn to many and varied sources of information as they begin their research. You and I know that not all of these sources are created equally. When asked which sources they used, nearly half of respondents began with the carrier. Not surprisingly, one-third searched the Internet, an equal amount spoke to an insurance agent or financial advisor, and surprisingly, nearly the same amount turned to their HR department (as in real life, individuals could seek info from more than one source). Fortunately for us (given how recklessly distorted their coverage can be), less than one-fifth turned to newspapers or magazines , while health care professionals barely registered a blip.
In a twist, these same individuals were then asked how valuable each of these sources were. Financial advisors were cited as most educational most frequently, followed by employers, then carriers and LTC producers equally. About 1 in 10 found the Internet most helpful.
If we drill down a bit, it turns out that each resource is seen as better equipped at answering certain questions about LTC planning than others. For instance, financial advisors are seen as more capable at addressing "alternatives to LTCI" than are insurance agents. But in the minds of buyers, no one understands the costs of the product, how the features work, what riders to consider, or how to purchase a policy better than insurance producers. Believe it or not, if a consumer wants to know "which carriers to consider," they believe their most trusted resource is a membership organization, which speaks to the value of an affinity endorsement.
One of the strengths of the AHIP studies has always been identifying what motivates buyers to "pull the trigger." In the study before me, that same question was repeated. When asked to provide a primary reason for purchase, "asset protection" once again rules the day, with older buyers (ages 55 to 70) more likely than younger to cite this cause.
We've known for a long time that buyers are planners, so it comes as no surprise that the second most popular reason given is to "prepare for the future and protect against future problems." Buyers are intelligent enough to recognize their health can change, which is why GPO features which freeze insurability would not be lost on this audience.
By the time we add the classic chestnuts like "peace of mind," "not being a burden on family," and "creating funds to ensure independence," we've now established the reasons behind over 65 percent of all sales.
We could lump another 16 percent of motivators in the general category of "getting older/getting sicker/wanting to buy while premiums are low."
The more objections we could eliminate before they arise, the easier the sales process would be in the field. So, this survey asked what were the buyers' biggest concerns with purchasing their policies? Far and away the biggest hurdle remains cost, accounting for nearly half of all objections — and this is coming from people who bought policies! To a far lesser degree, some feared they hadn't chosen the correct benefits (1 out of 10) or that they might never need it (1 out of 10). It's worth noting just how limited this concern is, considering the outsized attention it's received via linked benefit products sold to alleviate the fear.
Fewer still fear rate increases (1 out of 11), and just 3 out of 100 fear their company will go out of business, which suggests we, as an industry, continue to place far too high an emphasis on ratings rather than where our consumers' concerns actually lie (affordability).
During the process of researching and buying, consumers were again asked what obstacles they confronted. Many (around 40 percent) cited difficulty understanding which features and benefits met their personal needs. This is instructional for those agents who pride themselves on a "personalized" approach, or on simplifying the complex. Or perhaps it's indicative of the number of consumers who do not work with an LTCI specialist (as we continue to urge).
Rounding out the top three were "learning about the different LTCI plans" and "finding an affordable policy."
I was shocked by two criteria that ranked near the bottom: Only 4 percent had any difficulty locating a financial professional with whom to do business, and just 10 percent cited any concerns about trusting this person. While I'm enthused that trust is no barrier to the sales process — I've written before how our industry is unfairly demonized — I do wish consumers would spend at least as much time vetting and researching their LTCI specialists as they do their LTCI carriers. That they don't know they should is one of the greatest failings of the personal financial media.
As many of you know, consumers are advised to pay for their LTCI annually, when possible. First, doing so is one of the most expedient ways to qualify for a 2 percent to 8 percent discount. Second, agents who have performed a suitability analysis know that a financially qualified applicant has the funds available to do so, essentially diverting a fraction of the interest earned on their assets each year to protecting the nest egg in perpetuity.
Most importantly, it's very difficult to pay for insurance out of income. When we pay for things out of monthly income, it's too easy to end each month with nothing left over. Many individuals who do so find they live "month-to-month." So, imagine my surprise when new buyers were asked, "Where does the money come from to pay your LTCi premiums?" Eighty percent said that the funds came from regular income and bank draft. This is astoundingly high (although tempered a bit by the large presence (40 percent) of group policyholders among the respondents).
When these consumers were next asked if they had to make any concessions (e.g., cutting back spending, expenses), I was disappointed but not surprised to see that 43 percent answered yes. The takeaway is clear: If consumers are citing affordability as an issue — and they vigorously are — and are paying by the month, and having to make cutbacks to their lifestyle, then agents aren't really meeting their needs, are they?
And yet, our buyers are leaving happy. What's that, you say? While this author may have some misgivings from the Buyer Report, it turns out that consumers are fairly satisfied — enough so that 45 percent have recommended LTCI to friends, family or co-workers. Do you realize the significance of this?
Most of us claim to have trouble obtaining referrals. We all say we want more, but we don't know whom to ask, how to ask, or where to get them. Yet here's evidence that our very own policyholders are already giving them out. And it gets better. Although the number of referrees ranges from 1 to 6 (or more), the average number of people recommended to is five. In other words, nearly half of the people you've sold have already recommended the product to five additional people. All you have to do is get out there and insert yourself into that process! It's easier than you think.