I believe in manufactured quality, abundant benefit options, iron-clad guarantees, overflowing reserves and bold innovation. I also believe in competitive pricing, market acquisition, honest loss leaders and perception versus reality premiums. Yet even with this common juxtaposition in my belief system, I am absolutely, positively certain that price matters.
Regardless of your current favorite LTCI flavor of the month, relative cost remains the overwhelming and most predictive variable in the sale of LTCI. Current individual policies have an average premium north of $2,300 and asset-based sales north of $130,000. Price matters.
Two Markets and Two Purposes to a Sale. The middle-affluent buyer is replacing financial risk with classic insurance dollars, and the middle-mass buyer is protecting limited assets and, hopefully, at least positioning themselves to prevent government control of their lives at the point of claim. Yet, every sale has a price pressure point. A fiscal sales cliff of no return—with absolute success or failure in the balance. Survey after survey has identified price as the greatest obstacle to the sale.
Across the wide spectrum of LTCI experts, a clear understanding of what is required to move forward has developed. We must have smaller, more flexible product alternatives, and we must find a way to access qualified dollars. There is no such thing as a policy born too small. Any extra dollars added to savings, home equity, pension and Social Security can help buy freedom from the whims of capricious government bureaucracy.
Historically we have always moved immediately to lower benefit periods and greater elimination periods to drive cost down. Today all product manufacturers have responded with more creative and innovative pricing strategies such as:
• Non-qualified short term supplemental policies of dramatically smaller benefit periods and dollar amounts.
• Simple “money purchase” premium strategies, where the choice of premium determines the size of the benefit pool.
• Innovative guaranteed future purchase options.
• Combo life/chronic illness accelerated death benefit riders with no current cost to policyholders, where the cost is recovered at the time of claim from payouts.
• Partnership plans designed to protect smaller assets accumulations.
• Combo policies that, by definition, reduce net amount at risk.
• Policy structures that begin to transfer some of the interest risk to the consumer by sharing the success of the invested reserves with the policyholder. (Even when you add a guaranteed purchase option to this base plan it can reduce cost 30 to 40 percent.)
• An absolute plethora of creative inflation protection options all designed to reduce cost.
• And, of course, the old strategy of removing inflation protection costs and increasing benefits begins to make more sense in a stale interest environment.
It is time to re-examine our focus, re-evaluate our purpose, and enthusiastically embrace a simple cosmic truth: price matters!
Maybe it’s time to turn the LTCI sale on its head. Why not simply ask, “What does $50 or $100 a month buy?” You will be amazed at the number of purchase options available. Why not immediately drill down to premium tolerance and just get this done? Who says LTCI is too expensive?
Other than that I have no opinions on the subject.
Ronald R. Hagelman Jr., CLTC, CSA, LTCP
CLTC, CSA, LTCP, 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, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing "friend" of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman is president of Broadtower Insurance Solutions, a national IMO helping BGAs enhance LTCI production. Hagelman can be reached at Broadtower Insurance Solutions, Inc., 156 N. Solms Rd., New Braunfels, TX 78132. Telephone: 830-620-4066. Email: firstname.lastname@example.org. Website: www.BroadtowerInsurance.com.