Perhaps Las Vegas is the world’s greatest example of bad math. The results are, of course, overwhelmingly predictable—losing is highly likely. Yet this sure and certain knowledge prevents few from gambling—the prospect of catastrophic gain (or loss) is what defines all financial decisions.
Substantial rate increases and strategic carrier defections continue to plague our business. I am again reminded of wisdom from my father, who served as president of several insurance companies and who understood all too well that in insurance there are two bad math scenarios—too much premium or too little. We have seen some of both in recent months.
Health insurance models are best with slow, steady and predictable growth. Extreme increases in sales or lack of sufficient growth are equally destructive to the longevity of product exercises.
Across the board, our business is built on the necessity of making money on policyowners’ money. Level premiums demand invested reserves. Without the benefit of deferred interest income we become an industry in search of a purpose.
We know that at the heart of our difficulties is an interest environment as flat and barren as Death Valley. Each time I get “the” phone call from yet another casualty of repricing or someone simply throwing in the towel, I am again painfully reminded of the cause—bad math.
Politics do not belong in this column, yet we can only hope that this fall will precipitate a departure from the status quo. Each time we must absorb what appears to be yet another obstacle to sales, I am again reminded that this is all the more reason to complete every open LTC conversation in your known universe! The urgency to get it done is real.
In a recent announcement to my own distribution, I explained that dramatic changes to a specific carrier did not just create another “fire sale.” In fact, forest fires have been raging in the LTC insurance industry since HIPAA. In truth, we all must continue to scream from the mountain top that premiums will continue to rise and underwriting will continue to tighten. Yet, at the same time, we all must understand that bad math is dramatically restricting an adequate flow of water to put out the flames.
Establishing insurability and cost now remains the only protection from uncontrolled wild fires. Waiting to do the right thing is an extremely bad decision for all concerned—agents and consumers. Policies will never again be this competitively priced, and underwriting will never again be this permissive. Agents must act now to save their clients thousands in premium as well as establish the security of attained insurability.
The necessity to take action immediately shall remain true in every client conversation about leveraging the long term care risk.
• Believing that your clients’ health will not change is bad math.
• Ignoring the potential effects of future rate increases on new policies is bad math.
• Paying higher premiums for an LTC insurance policy is bad math.
• Leaving your clients open to the ravages of inflation (if it ever returns) is bad math.
• Ignoring the protection of your clients’ assets and retirement incomes is really bad math.
Bad math is a pox on all our houses. The urgency that really needs to be communicated is the meaning of not taking advantage of the current opportunity.
Other than that I have no opinion on the subject!
Ronald R. Hagelman Jr., CLTC, CSA, LTCP
Hagelman has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products. A nationally recognized motivational speaker, Hagelman has served on the LIMRA and Society of Actuaries LTCI committees and is past president of the American Association for Long Term Care Insurance, as well as a master trainer for the LTCP professional designation. He is president of Republic Marketing Group and a principal in the agent sales training company Hagelman-Barrie Sales Training Solutions. Hagelman can be reached at Hagelman Consulting, PO Box 310707, New Braunfels, TX 78131. Telephone: 830-620-4066. Email: firstname.lastname@example.org. Website: www.iltcicentral.com.com.