At the risk of fanning the flames of your sales efforts, I want to mention two trends that ought to motivate you to light a fire under your LTCi marketing and sales efforts. The first deals with multi-life program offerings and the second has to do with future product pricing as it pertains to 5% compound inflation protection. Both will provide you with important talking points in your efforts to encourage prospects and clients to take a serious look at long-term care insurance planning.
Multi-life long-term insurance programs have been a boon to many agents and insureds. Never before have small business owners been able to access high quality individual long-term care insurance for themselves, key employees and sometimes spouses on a simplified issue basis. This has allowed many consumers to get coverage that they would have been unable to qualify for because of very common health conditions. As you might expect, however, home office actuaries are watching claims experience very closely and undoubtedly they are poised to make adjustments to their criteria if they believe that they are not creating a profitable block of business.
For those of you following this topic, you already know that Prudential adjusted their program from requiring only three lives to seven in order to get simplified issue. Other companies (some of which you may be unaware of because they are not available in California) are wanting four, five, ten or as many as fifteen lives for significant underwriting concessions. MetLife continues to hold at three lives and while I’m not going to tell you they plan to increase that minimum requirement, it stands to reason they’re looking at their book of business carefully and will respond appropriately. How much warning we will have of the changes is anyone’s guess but I can tell you that nothing lasts forever except the regret of not being able to get insurance when you can no longer qualify.
The next big change will move the tectonic plates of the long-term care insurance industry, slowly yet surely onto a whole new course. Do you remember when lifetime benefits were affordable and available? When the actuaries and reinsurers started getting nervous about pricing an open-ended benefit, they did two things. First, they re-priced lifetime benefits, making them so costly they became unaffordable for many. Second, some companies decided not to offer lifetime benefits at all, substituting seven-year and ten-year benefit periods because of the finite nature of the risk.
Get ready, because I sense the same trend could be happening with 5% compound inflation protection. While you haven’t seen this in California yet, the first stage of this drift has already materialized. Several years ago carriers introduced “simplified” products that use a different inflation index such as CPI (consumer price inflation), or priced 5% compound unfavorably compared to other inflation options. Another case in point is MetLife: currently they are re-pricing new business premiums on their VIP II series throughout the country. From what I’m hearing, the 5% compound inflation rates are about 40% higher, depending on age. We expect to see these new business premiums in California by the end of summer or sooner. Where there’s smoke, there’s fire!
Do I think this is bad? No, it’s good that the insurance companies are managing their business in a responsible manner, so they remain viable with products that live up to the promises made to consumers. None of us want carriers to exit the marketplace or worse, become insolvent. We’ve learned to adapt to LTCi products without attractively priced lifetime benefits: we will adjust our planning and sales techniques to these and other changes as well.
In the meantime long-term care insurance, as it exists today, is the best it’s ever going to get. Speaking for Susan and me, we’re happy as hell that the premium for our first lifetime benefit/10-pay/5% compound inflation long-term care insurance policy’s premium is several years in the rear view mirror, and that our second lifetime benefit/10-pay/5% compound inflation policy only has four years to go. If we were purchasing today, we would not purchase lifetime benefits or 10-pay because of the dramatic re-pricing of these benefits. However, we were early adopters and we’ve benefitted from that. Consumers who purchase today’s products will feel the same way ten or twelve years hence when they compare what they’ve purchased to what is available at that time.
The opportunities before you are clear:
- Simplified issue, through the wonders of multi-life long-term care insurance, will not get better than it is today. MetLife continues to offer significant underwriting concessions at three lives and Prudential at seven. Transamerica has modified guaranteed issue at 15 employer-paid lives. You need to approach every business owner with this news and help them get some coverage.
- Pricing on 5% compound inflation protection is likely to go the way of lifetime benefits; “to the moon Alice!” Now is the time to sell as much of this benefit as you can, to as many clients and prospects as you can. Your failure to do so constitutes malpractice by omission.
With the uncertainty of our current economic environment, traditional long-term care insurance provides an important basis for the consumer’s financial plan. Speak to each and every prospect and client that you can about LTCi starting now; it will never get better than it is today!
To learn more about this critical subject, join us for a free webinar on Thursday, April 30 at 11:00 am titled “What’s Hot and What’s Not in Long-Term Care Insurance.” Watch your email for registration link, or sign up now at http://www.bjfim.com/ce_class.php.
Dear Barry and Susan,
I so enjoy learning from both of you. You make a powerful team with your vast knowledge and willingness to help us. The Webinar was great today, just wish I could write even faster than I do. Would love to have written copies of your presentations. Again, thank you, Sue Wonacott