Update, upgrade and celebrate

By Peter Gelbwaks

Gelbwaks Executive Marketing Corp.

In looking at the last decade, much has happened in our long term care insurance (LTCI) environment. A number of carriers have decided to withdraw from the LTCI marketplace, while others have entered into the market. Some have brought their own product with them, and others have "partnered up" to get a feel for it before making the big commitment.

Of the carriers that have left, most have done so because they were not garnering adequate market share to justify the risk, or there just wasn't an adequate volume of business showing up on the radar screen to impress their leadership.

The consensus is that LTCI has to be a "core" product line, not a "value added" product line for the carrier to make it worth their while. I totally agree. This is not a product line to dabble in for either the producer or the carrier. We need companies and producers to specialize in long term care, or, at the very least, move this issue to the front burner for consideration. We are still very early on in our evolution and specialists are very much in need. This is why I say it is time to upgrade.

As producers, we must do our best job and our due diligence in the selection of the right plan and carrier. Who is the best company? I say, it's the one that will be in business at the point of claim. A lot of LTCI buyers are now in their 40s and 50s and need to know that the company they are insuring with has a 50 year or better life expectancy.

But what is the best product? I submit that it's the one that will still be in-force at the time of claim (contracts that have not sustained numerous rate increases that would cause a policy holder to lapse).

The "flight to safety" plan is on, and it's time for you to get on board. Start paying more attention to who is making the offer and guarantees to you and your client. For example, I've been known to say, "I have a quirky habit of not doing business with companies that have less assets than myself or my clients."

Since the economic downturn that has occurred throughout the past year, we all feel more vulnerable -- and rightfully so. Taking a conservative position on carrier and contract selection is the least we can do to make our clients feel less vulnerable. People are still buying LTCI for two main reasons: protection of assets and maintenance of independence. Make sure their assets and independence are protected with a quality carrier and sensible product choice.

Let's look at what is going on now, understand it, grow from it and prosper from it. Why do I think this is an open season for less expensive and better contracts? I'm so glad you asked. There is a push/pull effect occurring in the LTCI industry. On the one side, there are the actuaries. They made two crucial mistakes over the last two decades in reference to pricing. They expected higher lapses (7 percent or more), are getting 1 percent to 3 percent, and they expected more people to die than actually did.
So, what happens if people don't lapse their policies and don't die? That's right: They go on claim. And how is that dilemma solved? Right again: They raise rates. In some cases, on existing books and in other cases, they begin selling new business at higher rates -- particularly to the older buyer. What else can actuaries do (other than finding work in another industry)? They can begin attracting much younger buyers. That is exactly where they are going, to couples who are younger and healthier. What else? They can -- and will -- design contracts with more cost-containment features (managed care style) elements. They may currently be called and even act like "value added" benefits, but eventually, can be used as "gatekeepers."

We need more educated sellers and buyers but, most importantly, we need more educated, well-rated, super-funded and committed carriers who can weather the storm if they make mistakes (intentional or unintentional), meaning carriers who can customize their thinking and plan design to suit the next generation of buyers.

The current LTCI offering is dynamite: limited pay, cash benefit, top rated carriers, worksite plans with limited underwriting and many other bells and whistles. All this is being driven by the marketing side of the carriers in response to corporate, who want more sales, more penetration and more market share. The actuaries want the same things; they are just not sure if it's priced right.

So where does this leave you, as the agent? First, before the end of the day, submit an LTCI application on yourself and your spouse. Become an owner of the concept and the contract. Then spend the rest of your time this year explaining to people why they should be buying sooner rather than later. Remember: The "fire sale" is back on and LTCI is never going to be any better or cheaper than it is today.

With that being said, this year is the time to celebrate. For the last 15 years, I've been telling producers that this is the breakout year for LTCI, meaning the right year to specialize in this business. However, this year I really mean it. Now it's up to you to educate yourself and your clients, stay informed, be a true believer and celebrate our collective success in doing good deeds and being rewarded for doing so.

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