When long-term care insurance (LTCI) first pushed its nose beneath the insurance product tent, it offered limited coverage to a narrowly defined population. As a result, it did not gain widespread appeal and never became a household word. In the 30 years that have followed, the product has changed dramatically, as have the clients financial advisors are targeting. What are the main factors driving LTCI today, and what does it take to sell the product to consumers who realize they need it but must be prompted, and sometimes cajoled, into taking action?
You need to understand the unique characteristics of LTCI prospects.
One of the main forces driving the need for LTCI is the significant decline in stock market prices, which has left many prospects concerned about their long-range financial futures. This makes today an excellent time to introduce LTCI to your clients and prospects. If youve been looking for a silver lining in the dark cloud of a faltering economy, it may be the increased interest people now have in making sure their financial futures are secure. As Peter Gelbwaks, CLTC, past president of the National Long-Term Care Network and president of Gelbwaks Insurance Services, Inc., notes, Asset preservation becomes more important when things are tight, and LTCI is an important planning tool for asset preservation. Beth Ludden, corporate vice president of long-term care marketing for New York Life, agrees that the whole concept of asset protection as represented by LTCI is more attractive in declining financial markets than in bull markets.
Steve Haas, CLU, FLMI, a State Farm agent in Bloomington, Ill., finds that his clients are asking him about LTCI during their annual insurance reviews. He thinks that the drastic drop in stock market prices is causing people to reevaluate their needs, making this a perfect time to discuss the asset protection LTCI provides.
Logic suggests that declining market values make introducing the need for LTCI a natural sales approach. A sharp drop in portfolio value can shake an investors confidence in a comfortable, no-worry retirement and help emphasize the importance of protecting and conserving assets.
But the declining economy is not the only factor that is encouraging the purchase of LTCI. There continues to be a growing awareness of the need for a wide range of services for Americas senior citizens, as their needs have become the basis for a national debate. This debate, as well as the one on prescription drug benefits for seniors, helps advertise the need for individuals to take appropriate action to protect their assets. The debate will also keep the issues of health and elder care fresh in everyones minds. The general concern about what will happen as we get older reinforces the idea that we must take control of our own destinies.
As with any new product, you should begin the sales process by working with your existing clients.
Support from the Fed
In addition to these debates, the federal government has endorsed the need for LTCI in various ways. First, it has passed the Long Term Care Security Act, which provides LTCI on a voluntary, payroll deduction basis to all federal employees. It has also offered tax incentives for the purchase of LTCIsomething currently offered by many states and available under the provisions of HIPAA. And while many have questioned the value of federal tax incentives to most buyers, the existence of these incentives can be a valuable tool in the sales process.
One executive who has seen a positive influence arising from the federal governments long-term care initiative is Bill Campagna, VP, annuity and long-term care marketing, MetLife Financial Services. According to Campagna, customer response has been extraordinary since the program was implemented several months ago. People are responding favorably and are buying even advanced riders such as home-health and respite care, he says. This shows you that there is a demand for LTCI products out there.
Appeal for younger clients
An increasing number of younger people are also showing interest in, and buying LTCI these days. Gelbwaks, who has been marketing LTCI for almost 20 years, sees his clients as younger, more educated, healthier and somewhat more affluent.
Once he has helped prospects understand the need for LTCI, he closes his sales calls by telling them about the high costs they will incur if they wait to buy the product. The cost of waiting is incredible, he says. It can be as much as 11 or 12 percent or more a year at ages over 60. That can be a powerful motivator for people to take action.
Arthea Charlie Reed, a Northwestern Mutual Financial Network representative in Asheville, N.C., finds clients among professionals in their 40s. She also targets professional practices because she has found that LTCI has special appeal when purchased by a practice or a business. Any agent who doesnt discuss LTCI with clients by their mid-40s, she says, is doing them an incredible disservice.
The market decline is causing people to reevaluate their needs, making this a perfect time to discuss the asset protection LTCI provides.
The graying of America
Older Americans represent the fastest-growing segment of the population. In the 1980s, the over-65 population was estimated to be about 11 percent of the population. By 2050, over 20 percent of the population will be over 65, according to many estimates. This graying of America increases the pool of prospects and clients who have an urgent need for LTCI.
Percentages tell only part of the story, however. Because the population of the United States is steadily increasing, the real numbers are more enlightening. In 1950, there were 12.3 million people over age 65 living in the United States. In 2000, the number had risen to 35.3 million. By 2050, the number will more than double to over 80 million.
Keys to success
With economic conditions encouraging people to take a closer look at their financial futures, a higher level of understanding of the need for LTCI and an expanding pool of prospects, how can you capitalize on these trends and make LTCI sales a major part of your practice?
There are no secrets for success. Becoming successful in selling LTCI takes the same commitment as selling any other financial product. Sometimes, however, it takes a little more. Here are some ideas and strategies that will help you take advantage of the current climate.
Know the need. Your first step is to do everything you can to understand your prospects need for LTCI. As Steve Haas observes, a lot [of agents] dont get involved in an area that seems unknown to them, so learn about the issues involved in long-term care. Visit the nursing homes in your area and take part in community-based programs. Become familiar with the services they provide. The NAIC Shoppers Guide encourages prospects to know the services that are available in their areas. You should know them, too.
You need to know the contracts you are marketing well enough to show your prospects where a feature or benefit is described in the policy and to explain it clearly and concisely.
Draw on your personal experiences and feelings about long-term care. What are your concerns for yourself, your spouse or your parents? Build on those feelings, but dont rely on them exclusively. Talk to people who are providing care for a loved one. Learn about their feelings and concerns.
Know the products. Learn all you can about the product that you are offering to clients and prospects. This may seem obvious, but it cannot be stressed enough. LTCI is a complicated product, with a seemingly infinite variety of features and benefits. Like disability income insurance, it requires the prospect to make a number of decisions about benefit amounts and periods, elimination periods, cost-of-living provisions and an increasing collage of riders. Study the competition and keep track of political developments. Your prospects will, and theyll expect you to be knowledgeable.
Know the contract. Too often, salespeople focus on the sizzle instead of the steak. But as Reed advises, Dont depend on just the sales brochuresread the contract.
You need to know the contracts you are marketing well enough to show your prospects where a feature or benefit is described in the policy and to explain it clearly and concisely. Use the contract in conjunction with the Shoppers Guide to help your prospects understand how LTCI can preserve their assets and protect their loved ones.
Know your prospects. You need to understand the unique characteristics of LTCI prospects. While this is appropriate advice in any sales situation, it is especially true in LTCI sales. Although the average age of LTCI buyers is dropping, those who purchase it tend to be deliberate and analytical in their decision making, and you need to take this into consideration. The sales process may take multiple interviews.
State regulations that require the use of the Shoppers Guide also encourage an analytical approach. Robert Glowacki, FLMI, CLU, vice president of government relations at AEGONs Long-Term Care Division, recommends using the Shoppers Guide as a positive sales tool instead of seeing it as a nuisance. He points out that your prospects will read it whether you help them or not. The Shoppers Guide provides an excellent summary of LTCI and can be used in conjunction with the contract you are marketing to show your prospects how the policy works.
Keep in mind that the Guide encourages the comparison of policies. This can be a disadvantage for some captive agents, but most have the ability to represent other carriers on a limited basis. This allows them to bring more than one proposal to the sales situation for comparative purposes. Glowacki stresses the need to have two or three different products available so that you can serve as an advisor instead of a salesperson.
Get involved. As with any new product, you should begin the sales process by working with your clients. State Farms Haas has built in a discussion of LTCI into his annual reviews and includes LTCI information as part of his routine client mailings.
As you develop your long-term care and LTCI skills, you should team up with someone who has more experience than you, advise both Gelbwaks and Margie Barrie, a trainer, consultant and principal of LTCI Consulting Group, Inc. You should also get a mentor and ask for home office support. Partner with someone in your agency or team up with someone from your NAIFA chapter. Get to know the successful LTCI marketers in your area and learn what it takes to become one of them.
As you become comfortable with the basics of LTCI and develop a feel for working with prospects, consider the idea of specializing in the area. Become an expert and position yourself as the resource that other professionals can call on to address LTCI issues. As Reed points out, You cant do retirement planning without discussing LTCI. So become the person who is positioned to meet this specialized area of need. Dont be an incidental producer, advises Gelbwaks. Be a specialist. They dont just sell LTCI. They live and breathe it.
Richard Weikart, CLU, ChFC, is a principal in Weikart & Williams, LLC, a training design and consulting firm in the Washington, D.C., area. You can reach him at email@example.com.
TIPS FOR SELLING LTCI
Target prospects who are about 65 to 74 years old first. People in this age group see long-term care as a real need. Either their health has already started to change, or they know friends and family members who have become frail. Younger people arent quite as concerned yet, and older people often have health problems that prevent them from getting LTCI. Once youve established a successful base of LTCI customers among retirees, you can then target Baby Boomerswho are increasingly willing to consider and purchase LTCI.
Use direct mail to create many qualified prospects who will become your customers. After refining my direct-mail methods over the years, I now get up to a 4 percent response rate consistently. With consistent response, youll recover the cost of your mailingand have profit too. You need to have both a top notch direct-mail piece that people will open up and respond to and an up-to-date mailing list. If you have both, youll succeed.
Speak at local clubs. This is another great way to get in front of many prospects at once. Groups like the Rotary, Lions, senior citizens groups, clubs for retired military, business groups and investment clubs are always looking for speakers. They usually draw 20 or more people for lunch or breakfast meetings. They typically do all the work in arranging the meetings and advertising them to their membersand you can often end up with 10 or more clients.
Getting in front of prospects is just the first step. When youre having your first face-to-face meeting with them, you need to be aware of how youre conducting the sale, and whether your prospects have any unspoken objections that could derail your sale. Sometimes, just a minor adjustment in your presentation can make a big difference in the results you achieve.
If youre primarily involved in selling investments, dont forget to ask your clients about LTCI protection. More people would buy LTCIbut no one has ever asked them. It doesnt matter whether you make the annuity, the investment or the LTCI sale first. Whats important is making that first sale and getting into position to meet your clients needs.
Wilma G. Anderson, The LTC Coach
Own the product yourself or sell it to someone close to you, such as your mother, father or grandparent. If you do not own it or dont have a close relative or friend who does, it may be difficult for you to believe in it wholeheartedly. Also, by owning the product or knowing a close relative who does, you will have a story to tell to prospects, which will come in handy as you try to overcome the objections you are bound to receive initially.
In the LTCI sales process, you must be able to connect with prospects on an emotional levelmore so than you do with almost any other financial product. This is not a mechanical sale; in fact, you can increase your chances of success by appealing to the emotions of your prospects.
Position the product as something prospects and clients can buy to protect their families. Try to convince them that if they buy LTCI, it will help their children take care of them when they cannot do so themselves. This will help make everybody happy, and they will be less likely to leave behind quarrelling siblings. Position it as family protection, not protection just for the buyer.
Bill Campagna, MetLife