By Lynn Vincent

The plot was a little like a feel-good children’s novel: The big kid on the block seemed intimidating, then turned out to be the best thing that ever happened to the neighborhood. That’s how the Federal Long Term Care Insurance Program (FLTCIP) played last year in the world of insurance and financial advisors who sell long-term care insurance (LTCI).

When MetLife and John Hancock won a joint contract in December 2001 to provide LTCI group plans to federal workers, many advisors feared the combination of the heavy-hitting insurers and the nation’s largest employer would represent unbeatable competition. After all, MetLife and Hancock’s contract secured a captive audience of 20 million eligible workers and family members, each one a marketer’s dream customer, complete with readily accessible touch-points such as pay stubs, employee newsletters and electronic bulletin boards.

And the marketing push was formidable. In 2002, the insurer team sent out more than a million LTCI enrollment kits. They drop-shipped educational material to 1,800 different locations, and conducted 2,000 face-to-face employee group meetings across the country. And between February 2002 and June 2002, the FLTCIP call center fielded 100,000 telephone calls.

Advisors who feared FLTCIP might dry up their business found instead that the program was a dam-buster, unleashing an unprecedented flood of positive publicity for long-term care products. U.S. government employees became more educated about LTCI, and advisors nationwide profited from the ripple effect, as awareness grew far beyond the federal flock. The ripples rolled so far, according to Roy Gosselin, assistant vice president of long-term care at MetLife, that many consumers began to initiate the long-term care conversation with non-FLTCIP advisors, agents and brokers.

LTCI sales increased 10 percent between 2000 and 2001, according to the Health Insurance Association of America’s (HIAA) LTC Market Survey. And though 2002 numbers won’t be available until later this year, the momentum generated by FLTCIP raises two questions: If you’re not offering LTCI to your clients, should you be? And if you are, what do you need to know now to better serve clients—and build your business?

Advisors who feared FLTCIP might dry up their business found instead that the program was a dam-buster, unleashing an unprecedented flood of positive publicity for long-term care products.

Why LTCI?
First questions first: Why should an advisor sell LTCI? “It’s simple,” says Massachusetts-based author and long-term care specialist Marilee Driscoll. “If an agent doesn’t, his or her clients have to go somewhere else to get it, or get the information about it. ... It’s still the hot topic that people want to hear about, and it’s a natural product to cross-sell to existing clients, with no client acquisition costs.”

Statistics may prove Driscoll’s point:

• Nearly two-thirds of those surveyed by the GE Center for Financial Learning said that a parent, grandparent or other family member has needed long-term care services.
  
• As many as half of all Americans now in their 50s will need such care during their lifetime, according to a 2001 National Endowment for Financial Education (NEFE) study.
  
• The U.S. Census Bureau estimates that by 2060 as many as 24 million people will need long-term care services.

Younger consumers seem to be waking up to those numbers. According to Gosselin, the age of LTCI buyers has fallen from the mid-60s to the high 50s. “Younger people are becoming more aware of the need for LTCI, and seeing that buying it is a good financial decision,” he says.

To meet that need, insurers are now generating new products to reach younger markets. “Some next-generation indemnity LTCI products behave like traditional disability insurance, and make LTCI an attractive option to consumers in their 50s, 40s and even 30s,” says Houston-based advisor and LTCI specialist Honey Leveen, LUTCF, CLTC. “When purchased at younger ages, LTCI is often so reasonable that a debate over choosing a limited or unlimited benefit period isn’t necessary.” Leveen adds that even more “ritzy,” full-featured LTCI policies can be very affordable at younger ages. “Familiarizing a whole new generation with this relatively new insurance product will greatly expand your target market and, as a result, greatly expand your business,” she says.

Rising rates
But the new LTCI generation may include a more demanding breed of consumer. Since many Baby Boomers have watched their retirement savings shrivel as of late, they’re more cautious now about financial services products. Those same potential buyers have, over the past year, watched insurance carriers hike their parents’ and grandparents’ LTCI premiums.

Until recently, rate hikes had been confined to smaller, lesser-known carriers, according to Robert Davis, president of Long-Term Care Quote, a national resource center specializing in LTCI. But bigger players like Aegon, Fortis and Conseco have recently raised rates, too. As of January 2003, six of the 10 leading long-term care insurers had raised premiums, says Davis.

Although rate hikes were reportedly significant—from 20 percent to as high as 80 percent—the reason for consumers’ shock and awe “has less to do with magnitude … than with the fact that products were likely sold with a high degree of comfort that rates were locked forever,” says Guy Bertsch, vice president of core market development for UnumProvident in Chattanooga, Tenn. “Unlike other kinds of insurance, [LTCI] rates are priced to be level-funded over the life of the policy.”

The premium increases have made consumers more discerning, Bertsch says. He expects potential LTCI buyers to perform more due diligence, carefully probing a carrier’s claims-payment practices, rate-increase history, financial ratings and the overall quality of its underwriting. “This is where the advisor has a lot of influence,” he says, noting than an informed advisor can steer clients toward conservative underwriters. “In the past, a lot of brokers were happy to place clients with any carrier that would take them.” Now that LTCI premium increases have damaged some client-advisor relationships, “brokers are running away from some carriers in droves,” Bertsch says.

And carriers know it. Marilee Driscoll attended the Society of Actuaries long-term care conference in January 2003. “Rate integrity and stability was the No. 1 ‘buzz’ in the halls and breakout sessions,” she says. In response, insurers now are pushing limited-pay policies, or policies that allow the insured to lock in guaranteed level premiums for up to 20 years. Driscoll believes this trend will continue as consumer trepidation over rate increases grows.

Still, potential buyers have grown less skittish about LTCI overall. By 2010, almost half of the U.S. workforce will be involved in caring for an elderly parent, according to NEFE. Jim Thornburgh, J.D., LLM, vice president of advanced sales at Innovative Solutions Insurance Services in Los Angeles, says the positive publicity surrounding FLTCIP has “removed the stigma of purchasing LTCI.” For younger workers, “purchasing LTCI is no longer about putting mom and dad in a nursing home for next 30 years,” Thornburgh says. (Continued…)

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