Strategies for LTC success in the worksite market
By Steve Cain
America’s workplaces present long term care producers with a vast and largely untapped market for long term care insurance.
America’s workplaces present long term care producers with a vast and largely untapped market for long term care insurance. However, success in this territory requires an understanding of the challenges and the right strategies to overcome them.
Employer-paid coverage: economy presents a high hurdle
While the economy is officially in the midst of a recovery, employers remain cautious with their cash flow. Their conservatism is compounded by relentlessly rising health benefit costs, leaving many of them reluctant to add new employer-paid benefits.
Nonetheless, there are some employers adding paid long term care insurance to their benefits packages. In my experience, I’ve found small to mid-market companies are the ones most likely to go this route, attracted primarily by:
- Tax benefits: LTC insurance presents employers with a rare combination of tax angles. Premiums are generally tax-deductible while benefits are tax-free. That’s a sharp contrast to disability benefits, where paid premiums translate into taxable payouts at claims time.
- Flexibility: Employers frustrated by top-heavy rules associated with retirement benefits find LTC benefits refreshingly flexible, since they can be restricted based on criteria like job classification or years of service without jeopardizing tax benefits.
Over the past year, the majority of new group cases have been found in the voluntary market, part of a broader trend toward voluntary benefits in general.
Naturally, it’s much easier to persuade employers to offer voluntary LTC benefits than paid coverage. Price tag aside, a voluntary LTC program is a way for companies to prove that their interest in employees’ well-being extends well beyond their working years. And since long term care expenses represent a threat to retirement security, LTC protection is a logical companion to 401(k)s and other retirement plans.
However, success in the voluntary market requires much more than simply being added to the list of options. Prompting employees to purchase LTC protection starts with getting their attention and making an informative and convincing case that motivates them to action by allocating scarce dollars that could be spent elsewhere. Relative to employees’ competing priorities, I like to call this the fight for mind-share and wallet-share.
Unfortunately, most producers aren’t terribly effective at winning these battles. Industry wide, enrollment rates in voluntary plans are lackluster — typically around 5 percent. Topping that tepid close rate requires focusing your energy where you’ll get the biggest return on the time you invest. To do that, you need:
The right group.
Before you decide to move forward with a workplace opportunity, start by pre-qualifying the group. Key traits include:
- Age: Willingness to give LTC serious consideration generally starts around age 45.
- Income: It’s important that your audience has disposable income; look for groups where a substantial number of employees earn at least $60,000.
- Gender: Women tend to be more sensitive to LTC needs.
- Education and job title: Employees with higher education and professional careers are more likely to appreciate the need for LTC.
- Planner mentality: You want to work with workers who take financial planning seriously. Gauge this is by asking about employees’ participation rates in the company’s 401(k) as well as other voluntary programs.
No matter how sharp your skills or how competitive the product, no LTC marketing effort can thrive without the sincere interest and active involvement of the employer and its leadership.
As producers, our natural inclination is to say “yes” to any opportunity; however, to avoid a costly investment of your time, it’s critical to identify and walk away from situations where an employer isn’t likely to rise to the challenge.
To make this assessment, ask the company how they’ll define success with the LTC program. Are they merely interested in “checking a box” and having it as an option, or do they believe in the product and have a reasonably aggressive target for employee participation? Which key leader will serve as the internal champion?
The right timing.
Winning the battle for mind-share and wallet-share is easier when the program isn’t rolled out at the same time as the employer’s annual benefit enrollment. Employees already overwhelmed by health plan choices and put off by rising health care costs won’t be as ready to give LTC its due consideration.
The right communication strategy.
Since different people have different preferences for receiving information, make sure you use a variety of methods for communicating. These include:
- Live, executive-only meetings and webinars
- Pre-recorded three- to five-minute webinars that can be accessed via links in an email or website
- Messages from a key company executive — which can be in the form of a letter, email, audio or video — explaining why this is an important need that employees should address
The right resources.
The further downstream you go, the more insurers exclusively rely on producers to manage every aspect of enrollment. If you don’t have the capacity, time or expertise to fully execute a roll out, consider aligning yourself with a brokerage organization that can support you and function as an extension of your business.