As I head towards my celebration of the Jewish New Year (5769) it is difficult not to take today?s financial market distress and free fall into consideration. The generational school of historical thought (Strauss & Howe) has predicted, since the mid-1990?s, a severe crisis of some sort befalling our country just about now. In their model, history doesn?t necessarily repeat itself but is impacted by generational forces that have recurred throughout our history. The fact is that the generational alignment that exists today is identical to the one that existed 79-years ago; 1929.
The Great Depression was triggered by restrictive trade laws, tight money policies, tax increases and a government unable to cope with the events that transpired. Regardless of the economic theories of the day and unprecedented government intervention our nation did not begin to pull itself out of economic dysfunction until we entered our next great challenge in 1941; World War II. Today?s credit and financial market debacle appears to be a result of easy credit being provided to people who were not qualified to receive it, the ?creative? packaging of sub-standard mortgage risk, and regulators who either would not or could not oversee practices destine to create the results we now see.
I believe that many of our current problems began when financial institutions such as banks, insurance companies, stock brokerage firms and investment houses were allowed to imitate the services and products that they provided consumers. Supported by quasi-governmental agencies Fannie & Freddie Mac, this house of mirrors diminished transparency leading to our current circumstances. Mix in the ?mother?s milk of politics? (Jess Unruh) and now we have politicians, many of whom are operating under severe conflicts of interest, trying to fix the mess that they have created over the past decades. This isn?t a political statement; as we have painfully learned there?s plenty of blame to go around.
Is this the beginning of Great Depression II? Far be it from me to be able to answer that question. Like many Americans I?m watching my net worth diminish daily and I actually have a home on the market that I doubt will sell anytime soon. Intellectually I know that panic is not the answer but it is hard not to worry. This leads me to my primary point; how do we get consumers to purchase long-term care insurance as their nest eggs shrink, their businesses suffer and they worry about their jobs or making payroll.
The first answers are the easiest. If people were planning to use their income, assets or equity in their homes as their long-term care planning tool it should be obvious, once and for all, that they can?t always count on those assets to be readily available. Regardless of the final bailout cost for this mess, if consumers believe the government will be able to take care of their long-term care 20, 30 or 40 years from now they are already suffering from some form of cognitive impairment. We know that the government won?t be able to tax its way out of this problem; if people aren?t creating income or wealth there will be little to tax.
Another worry that consumers may have is the financial viability and stability of the insurance companies selling long-term care insurance. This is a reasonable concern. My response to this anxiety is the fact that LTCi is heavily regulated, particularly in California. It is also one of the most scrutinized when it comes to pricing practices and reserving requirements. While insurance companies do run into trouble, from time to time, history points to a fairly stable and responsible industry.
The final objection might be hardest to respond to; in times like these where do consumers find the money to pay for long-term care insurance? Regardless of whether you are making a business or individual sale the answer is to start by showing plan designs and benefits that may not be quite as ?rich? as you may be accustomed to. First, you want to avoid sticker shock. As I?ve written in the past, when it comes to selling long-term care insurance, it is easier to sell up than down. Second, solving part of the client?s long-term care problem today is the best solution in the environment we are currently operating in. You will always have an opportunity to show a ?richer? plan after the client feels comfortable with the initial program that you present.
As I finish writing today?s Blog the U.S. Senate, in a rare display of bi-partisanship, has voted to approve the financial ?bailout? plan and now it heads to the House of Representatives. It is likely to pass and become law. We will all have a ringside seat to see if this will achieve the goals set for it and calm credit markets. In the meantime our job continues; provide high quality insurance products to protect people?s assets and income. Long-term care insurance continues to be an important element of this protection.
We continue to stand ready to help you reach long-term care insurance sales success.
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Barry,
Thank you for a great article. I was just discussing this subject last night. Your reasoning regarding insurance companies strength is well taken.(Regulation and reserves). It is an objection that we will all be getting and I think you had the perfect answer. This is probably a great time for an article in the newspaper about LTC. I have many wealthy clients that were going to self-insure. As you know I have always respected your LTC wisdom. We have LTC guild meetings once per month in the Bay area. Would love to have you speak. Let me know if and when you are available.
My Best Always,
Rosanne
Thank you; I’d be happy to discuss the possibilities with you.
Barry