Michael Stilwill had heard just-under-the-wire insurance stories before. But now he tells one of his own. The New York Life agent had as clients a couple in their 60s who had retired to Hendersonville, N.C., a laid-back, post-career mecca tucked into the piney slopes of the Blue Ridge Mountains. Both in excellent health, the couple had applied for long-term care insurance (LTCI), completed the medical exams and underwriting and settled in to wait for their policies. “At that time, it took six or seven weeks to get a policy,” Stilwill, a member of Western North Carolina AIFA, explains. When he got the clients’ policy and went to their home to deliver it, “I walked in the door and there were tubes coming out of the man’s neck and midsection. The first thing I said to him was, ‘What happened to you?’ The first thing he said to me was, ‘Have you got my policy?’”
What had happened was this: The husband’s kidneys had failed—after LTCI underwriting, but before Stilwill could deliver the policy. “I filed a claim the same day I delivered the policy,” he says.
If every agent had a story like that, selling LTCI in today’s rising-premium environment might be a little easier. But even producers without first-person, nick-of-time sales tales are successfully building their LTCI businesses. What it takes is careful prospecting, empathetic sales techniques, increased sales efficiency and helping clients find the money to pay for their policies.
Three industry trends
Old hands have this advice for agents considering adding LTCI to their practices: Be aware of three developments over the past 12 months. First, there has been a general decline in the average age of LTCI buyers. While most LTCI buyers were in their 60s and older just five years ago, producers note an increasing number of buyers in their mid-to-late 50s. The result is not a shift in prospect demographics, but an expansion—or to put it plainly, more potential customers. Second, group LTCI has evolved from a peripheral curiosity to a mainstream perk among employers and associations looking for reasonably priced ways to sweeten employee and member benefits. Third, and perhaps the most important trend from a production standpoint, the dynamics of the LTCI sales transaction has moved from explaining the need for LTCI coverage to answering the question: Why buy it now?
These trends appear to be linked to the 2002 rollout of the Federal Long Term Care Program jointly managed and underwritten by John Hancock and MetLife. More than 250,000 civil servants enrolled in the initial offering, providing a word-of-mouth publicity wallop and a trickle-down effect to other employers. Still, industry statistics on the growth of employer-sponsored programs are a mixed bag. Group LTCI sales grew 23 percent in 2003 to $257 million in annualized new premium, according to LIMRA International, bringing the compound annual growth rate from 1998 to 2003 to a staggering 54 percent. However, much of the growth since 2002 has been the result of the federal program.
Without that LTCI heavyweight, new premium in the rest of the employer market dropped 17 percent. But LIMRA notes that nearly half of the companies that participated in its 2003 LTCI survey did experience growth last year in employer-sponsored LTCI sales.
MetLife’s group LTCI business is on the upswing. Multilife and executive carve-out contracts last year accounted for just 5 percent of the company’s LTCI business. Celeste Cobb, MetLife’s vice president for individual LTCI, expects that share to jump fourfold in 2004—and continue its climb in 2005.
George Leslie, State Life’s regional vice president, explains why carve-outs are hot: Employers can choose which employees to cover; there’s no cost to the employee; employers can include spouses in coverage plans and can deduct the cost of LTCI premiums when preparing their tax returns.
Meanwhile, Tim Cope of the Fleischer Jacobs Group in South Burlington, Vt., says he’s seen most of his LTCI growth over the past 18 months come from executive carve-out plans. “Ten or 12 years ago, I did seminars on LTCI, and met with CPAs and lawyers,” he says. “Then two years ago, I started [approaching companies] and trying to sell LTCI to all the employees.”
But that approach proved less profitable than this NAIFA-Vt. Burlington member would have liked: “I wanted to move into something that gave me larger sales with the same number of visits.” His solution: executive carve-outs. “If I can sell LTCI to six individuals in one visit, why wouldn’t I want to do that?”
Here’s the model that’s worked for Cope: The employer buys LTCI for key employees, and also offers it as a voluntary benefit for other workers. “By having the carve-out in there, I know that I’m going to get paid for the amount of time I spend,” Cope says. “Whatever happens with the voluntary program is icing on the cake.”
And carve-outs tend to multiply icing. Cope says that if company owners believe that LTCI coverage is so important that they buy it for themselves, they’ll encourage other employees to participate in the voluntary program.
But none of those advantages make carve-outs a sure sale. One common objection, says Leslie, is that decision makers often confuse executive carve-outs with the common group LTCI coverage they already offer all workers. It’s important to show how the plans differ, he says, and that the carve-out is a perk reserved for owners and key employees.
Association and affinity-group programs represent fertile ground for producers looking to build their LTCI business. Robert Forman warns, however, that if you’re new to that market segment, don’t imagine for a moment that it’s like selling to an employer. “The whole decision-making process in working with an affinity group is a million miles away from working with a company,” says Forman, president of Long Term Care Associations in Nashville, Tenn. With an employer, he explains, the producer normally works with human resources (or in smaller companies, with principals) to create a voluntary or mandatory program, and is looking for the company to participate financially in the plan. According to Forman, with an association or affinity group, “we’re not looking for financial participation. What we look for is an endorsement from that organization, preferably from the president, promoting the need for long-term care coverage to members.”
How do you grow your affinity or association-based LTCI business? “Don’t go elephant hunting,” Forman cautions. “The natural inclination is to go out and look for big things to shoot at. Instead, look for a few gazelles.” That is, look around in your community for groups that have strong affinity relationships with their members. According to Forman, the key to generating high-quality association and affinity-group leads lies in the quality of the relationship of the organization to each member.
“If you go set yourself up to speak at the Kiwanis Club breakfast where everyone just shows up for free juice and coffee, you’re not going to do very well,” he explains. On the other hand, he adds, if you set yourself up with a small local credit union that serves a local company that employs half the town—and finances half of its cars and homes—you will do very well. While Kiwanis members will likely be lukewarm, credit union prospects are more likely to say, “The credit union is sponsoring long-term care coverage? God, I love the credit union!”
WHEN SELLING LTCI:
• Use careful prospecting methods.
Also, keep these three trends in mind:
With its myriad faces in far-flung towns, affinity and association selling represents a growth opportunity for all agents. Meanwhile the LTCI market at large is a growth industry for independent agents. Increasingly, carriers are setting their distribution sights on independent agents and brokers, and LIMRA reports that hints of this trend first surfaced in 2002. This year, sales numbers bear it out: The independent distribution channel accounted for 47 percent of new individual LTCI premium in 2003, a 4 percent jump over 2002, according to LIMRA.
How can independents leverage the trend? One way
is by becoming students of the LTCI market: Which carriers offer
the lowest premiums? Which are better for married couples? Which
offer discounts to specific market segments
“There’s no question that the graying of America continues to march forward and that carriers continue to see a need for LTCI,” says Forman. “The big challenge is finding the producer population that has the level of expertise necessary to sell the product.”
Unlike universal life or even Medicare supplemental insurance, LTCI isn’t a commodity, Forman explains. It’s a need-oriented product that requires a specialized skill set to sell it effectively. One particularly important skill is the ability to empathize with clients and prospects, to be able to guide them out of their comfort zones and into the darker realm of potential long-term disability. LTCI customers, he says, are less concerned with the cold calculus of long-term care than with the emotional side of the issue: quality of life during a disability, for example, or becoming a burden to spouse and family, where they would go and who would take care of them. Forman recommends that producers who have specialized in selling investment-driven products seek out a mentoring relationship with other agents with more experience selling need-based products such as disability or LTCI coverage.
New York Life’s Stilwill, 40, may be your
man, having established himself as a model of credible empathy:
He owns LTCI himself—and has since he was 34 years old. “A
lot of agents selling LTCI don’t have it themselves,”
he notes, adding that he bought his policy not as a sales tactic,
but because he truly believes in the product. “Something that
really needs to be stressed to clients is that you believe in the
coverage so much that you have it yourself. That really touches
It also hits younger clients where they live, Stilwill says, opening the door to talk with potential buyers in their 40s who may want to lock in low premiums. Although they’ll never be as low as what Stilwill pays ($99 a year!), his experience is a good demonstration of how premiums have jumped 300 percent to 400 percent since he bought his policy just six years ago. “The biggest problem I have now is getting clients approved. I try to stress the importance of locking in their age and insurability,” he says.
SUCCESSFUL LTCI AGENTS SAY THE PRODUCT ISN’T “CEREBRAL” LIKE OTHER FINANCIAL PRODUCTS, WHERE THE PRODUCER CAN CAPTURE AND SUSTAIN INTEREST WITH MONTE CARLO PROJECTIONS.
The cost of waiting
Cope agrees. “Show the client the cost of waiting,” he says. Boiled down, that means showing them that their premiums will basically double for every 10 years they delay. Cope says the mistake some agents make is not factoring in the increased cost of care in the future when they project policy costs. It’s great to compare today’s dollars with tomorrow’s dollars, but it’s critical to show clients what tomorrow’s dollars will—and won’t—buy.
But don’t go overboard stressing numbers and statistics during LTCI sales meetings. Sure, there are boatloads of statistics an agent can serve up: Scary numbers abound on how many people will eventually require long-term care, how much it will set them back, and what kind of a hit to expect from inflation. But successful LTCI agents say the product isn’t “cerebral” like other financial products, where the producer can capture and sustain interest with Monte Carlo projections showing return-on-investment to the “nth” decimal point.
That’s why MetLife is already working with its agents to change LTCI sales methodology company-wide. “Historically people have come at consumers with data, facts and the odds of needing care,” says MetLife’s Cobb, “but the most important thing a producer can do with his or her clients is to have them think about what they will do if they need long-term care, and to ask clients the question, ‘What would you want to happen?’”
Cobb says the emotions play out differently for different age groups. Boomers, for example, are still in group-denial over the possibility of needing long-term care—even when they’ve personally acted as caregivers to ill or elderly relatives. The GE Center for Financial Learning surveyed 1,000 Boomers, 45 percent of whom had acted as caregivers. About four in 10 admitted they had not planned for their own long-term care, discussed the topic with their family, or even prepared a will or living trust. As a group, Boomers often think about long-term care from what might be called an emotional-financial perspective: “Gee, do I really want to be dependent on my children for support? What will be the financial impact on my spouse?”
Clients 75 and older tend to think in terms of preserving an inheritance for their children. While they are more willing to consider relying on their children for physical care, they also are concerned about protecting and passing on wealth instead of, say, funneling their assets to a nursing home.
Wealth protection is, of course, one of the most important reasons for anyone to purchase LTCI. But often, clients with the most wealth are the least enthusiastic about buying coverage. “When I deal with millionaires or high-net-worth individuals, the first thing they’ll say to me is, ‘Why don’t I just self-insure?’” says Stilwill.
His solution: Help the client see that, by that logic, he shouldn’t carry homeowners or car insurance either. “I try to show them that it’s not so much the money as it is the peace of mind,” he says.
Finding the money
When money is an issue, Tim Cope tries to help clients find a way to pay for the policy. “It’s helping them transition from thinking about paying for LTCI with the money in their checkbooks to paying for it with money in their investment accounts,” he says. “It’s helping them think about using a percentage of investments to pay for LTCI, instead of a percentage of income.”
Cope will say to the client, “If I can show you how to take a small percentage of what you have and protect the whole pot, would that interest you?” Of course the answer is almost always yes. Then he shows the client how the cost of LTCI isn’t so much an annual bill but a percentage of their wealth they’ll use to protect the rest from being sapped away by long-term illness or disability.
Cope says he usually saves that paradigm shift until near the end of the sales meeting. “People don’t walk in to talk about long-term care relaxed. They walk in worried that their kids are going to be changing their diapers,” he explains. But “their shoulders drop,” he says, when he helps them see that they really can afford the coverage, simply by viewing it differently.
When selling LTCI, Cope says, “Listen to your clients and understand what is driving them. What is scaring them? What is their personal experience? What kind of care will they want? Then take that information and design a policy that meets their needs.”