If you scratch the numbers out on paper, they don’t seem to make sense.
The U.S. Census Bureau estimated that the U.S. population in 2000 had surpassed 291 million. More than 61 million of these individuals were between 45- and 64-years-old, and more than 34 million were 65 and over—all prime prospects for LTCI.
Yet, LIMRA estimates that only 4.8 million Americans have individual LTCI coverage, and only an additional 1.2 million are covered under a group LTCI plan.
Six million total.
That leaves a lot of Americans without LTCI—and with a potentially damaging financial exposure down the road should they need long-term care services.
Just let them talk. Some of the stories are just heart-wrenching, so they’re creating their own need.” —Cindy Bong, CSA, LUTCF
A number of NAIFA members have theories about why the numbers are not higher. Michael Fitzpatrick of The LTC Partnership, LLC, in Parsippany, N.J., and a Greater Essex AIFA member is one. “I think that LTC hasn’t reached the penetration that it ultimately will because it is still an ancillary product in a lot of people’s eyes,” he says.
Cindy Bong, CSA, LUTCF, a member of NAIFA-Southeast Wisconsin and Wisconsin AIFA’s president, says, “Sometimes I think it’s easier to plan for premature death than for when our health changes, because we don’t want to think about what we’re going be like when our health changes,” she says.
Larry Herman, J.D., CPA, CLU, ChFC, a member of NAIFA-Chicago, chalks up the less-than-impressive numbers in part to a depleted harvest of ready-made sales. “A lot of the sales we’ve had in the last few years are admittedly the easy sales, the low-hanging fruit, to people who already understood the product and were ready for it,” says Herman. “But I think a lot of that’s been tapped out, and now we’re faced with selling it to the larger masses.”
Furthermore, some advisors are apprehensive about selling LTCI, Herman believes. “Advisors felt they had put themselves out on a limb in the past for LTCI—a product that until recently carriers had little experience in pricing,” says Herman. “Then, when they had to explain to their LTCI policyholders either that their LTCI carrier was leaving the business or their premium would go up—in some cases quite a bit—the client-advisor relationships suffered.” Consequently, some advisors felt they had been burned by LTCI and backed off selling it.
Is the LTCI sales picture grim? These advisors and others we spoke with say no.
The answer to LTCI sales success, however, lies in stretching further to reach viable, “open” prospects and clients. For many advisors, that may mean taking a second look at their target market for LTCI.
“We’re starting to see a younger group of people buy the policies, and I think we need to be focusing on this younger group, meaning clearly anyone over the age of 50,” says Herman. “I can make a case for people in their 40s buying the coverage, but I think the sweet spot of the market is the 50-to-60 age group.” Herman favors this age group for a number of reasons: “One, it is relatively untapped. Two, prices are far more reasonable at that age so you’ll have less price reluctance. Three, you don’t have the same insurability problems at these ages as you do at older ages.” Add them all together, says Herman, and “it’s really the right demographic.”
While Herman’s preference is the 50-to-60 set, many advisors are targeting the even-younger, 40-plus population, and, when all is said and done, clients do seem to be getting younger.
NAIFA-Chicago board member Tom Riekse Jr., CEBS, of Chicago-based LTCI Partners, LLC, sees it every day with the producers he works with. “The trend we’re seeing is that there are more sales now to people in their 40s than in their 70s, so there really is an emphasis on younger and younger ages. The successful producers are not waiting for their clients [to get older], because they’re finding that younger clients are receptive to hearing about LTCI. They understand the demographics as well as the public financing issues that will come into play when Medicare, Medicaid and Social Security run into trouble, so they’re very eager to get started on planning for potential long-term care needs.”
Finding prospects and clients
Where should advisors look for prospects? Romeo Raabe, LUTCF, LTCP, an independent producer with Informed Choice in Green Bay, Wis., and a member of NAIFA-Northeast Wisconsin, believes that the most important component of an advisor’s LTCI marketing effort is going after his current clients.
“I can make a case for people in their 40s buying the coverage, but I think the sweet spot of the market is the 50-to-60-age group.” —Larry Herman, J.D., CLU, ChFC
“They’ve already bought from you once,” says Raabe, “so you need to pick your clients who are between 40 and not dead yet and ask them, ‘Have you ever considered what would happen to your net worth and your assets if you needed nursing care? How will you pay for care? Where will you take the money from for the first month of care, and the second month and the third month? What will you sell? What will you liquidate? Did you know there’s LTCI that can pay for that?’”
The senior arena
To line up prospects, Bong networks with other professionals in the senior arena: “I attend the Waccasau County Senior Consortium, she says. “It meets once a month. There are people from facilities, home-care givers, elder-law attorneys,” who refer prospects to Bong.
Bong is also a member of a team that presents a workshop called Positive Transitions. “I talk about long-term care and housing options. We also have an elder-law attorney and a senior real-estate specialist. She works everything out, from what [items] family members get, to moving and setting up the new place. And then there’s an insurance agent who addresses liability issues and Medicare supp,” explains Bong.
Advisors who have a handle on the elderly services in their communities can develop a similar workshop.
Fitzpatrick’s greatest success in gaining access to individual prospects is the effort he puts into building strategic alliances with financial advisors and other professionals who “touch” ideal LTCI prospects.
“A strategic alliance by far is the most effective method,” he says. “I developed a resume, and I’ll give it to anyone who I want to develop a strategic alliance with. The resume says ‘I want to work for you and here’s my list of credentials and accomplishments, my speaking engagements, my organizational affiliations and what I’ve accomplished in the LTCI arena. I’m not seeking anything from you, and in fact, if all I do is work for you and handle your clients’ LTCI education, I’ll cut you in, if you’re licensed, to receive compensation on business I generate from your clients.’”
Introductions through strategic alliances make three key things happen, according to Fitzpatrick. “One, the people I’m educating do not perceive me as a salesperson. Rather, they are listening intently to the story that I have to tell, so I win,” says Fitzpatrick. “Two, the client wins because he is truly getting an educational opportunity to see how LTCI applies to his circumstance. And three, the referrer benefits because he can essentially sit on the same side of his client and say to him, ‘My job is to bring the best talent to you and from there, you and I can discuss what we think is appropriate. I’m with you.’ The best cases I’ve ever written have occurred when I’ve truly developed an alliance where all parties involved believe that it’s a win-win-win relationship.”
The presumptive approach
For Herman’s firm, success in selling LTCI comes from a belief that traditional financial planners need to embrace LTCI not as a product to sell to a prospect, but as an important part of a client’s financial-planning process.
He suggests advisors use the presumptive approach to incorporate LTCI into the planning process: “It has to be a part of every annual review. The thinking has to shift to the presumptive type of thinking. In the planning process, the financial advisor might ask questions like, 'Who’s your attorney? Who’s your health insurance with? Who’s your liability insurance with?’ A natural, part of that should be this question: ‘Who is your LTCI with?' not ‘Do you have it?’”
Herman is a stickler for this. “If you’re doing financial, retirement planning for a couple and you haven’t insured or protected their retirement against long-term care costs, you’ve certainly not done a complete job,” he insists.
Facing a tough issue
Bong agrees with Herman’s big-picture view. If clients don’t have LTCI, she believes they haven’t talked about possibly needing long-term care services some day. This outright scares her.
“People are not talking about it until they think it’s important, but a person’s health can change in a day. As soon as it’s affordable for them and they’re healthy enough is the time to be talking about it,” says Bong. An ideal time to bring it up is once a client is no longer paying a child’s college tuition. “That’s when I can say, ‘Now let’s take that money and put it toward your LTCI,’” she adds.
Chances are, says Bong, the client won’t feel the squeeze because the money had already been budgeted for college tuition, so it’s just a switch to cover a new need. “To me it’s protecting your children’s education. You’ve worked very hard to give your kids an education so they can have a wonderful career. You don’t want them to have to leave that career to take care of you when your health changes. So it’s an extension of planning for your kids,” she says.
“What we’re trying to educate people to do is look at the cost of waiting, which is huge.” —Reed Schnittker, RHU
NAIFA-Dallas member Reed Schnittker, RHU, of The Plus Group in Plano, Tex., recommends advisors approach individuals who are still working and can pay off their LTCI policies while they are still earning an income. “We’re trying to educate people to look at the cost of waiting, which is huge,” explains Schnittker. “One of the consequences is insurability. We’re recommending that people look at the bigger picture: Here’s what it would cost today if I purchased it. How much would it cost if I wait five, 10 or more years, assuming I don’t have the insurability problem?” This motivates many clients.
A family discussion
Schnittker has seen many successful advisors take a family-oriented approach to selling LTCI. “It’s very cool,” says Schnittker, “when the really good planners say, ‘How often do your kids come into town?’ and the client may say they come in around Thanksgiving or Christmas. Then the advisor would say, ‘We’d like to meet them at some point to just explain LTCI to them. LTCI is a very unselfish product. If you can demonstrate that you’ve purchased this product that will provide x dollars of benefits in the event you need nursing care or home-health care, you really need to communicate it to your kids.' Frankly, it’s also a perfect opportunity to cross-sell to the children because it’s a great door opener.”
Creating the need
To persuade prospects to accept the need for LTCI, Bong takes a lesson from the LTCI trainers she’s heard speak: Use your personal experiences with family or friends needing and having to pay for long-term care services, and have prospects do the same.
“When I meet with someone for the first time,” explains Bong, “I generally try to find out what their experience has been with long-term care—if a family member has needed long-term care, and if they have had to go through arranging for and financing long-term care for someone,” she says.
She says this approach can work with an individual or an employer: “The employer can look at it in his own life, but also see how it’s going to impact the workforce as it happens to them. Just let them talk. Some of the stories are just heart-wrenching, so they’re creating their own need by telling their own stories.”
LTCI at work
Bong sees the workplace market as huge and leans toward the family-owned businesses.
“I think the most favorable is to have a family-owned workplace that is already taking care of key people—a smaller place where they’re very close to their employees,” she says.
Fitzgerald’s firm also sells LTCI in the workplace. He has been successful because he exposes the trickle-down cost to businesses when an employee has to tend to long-term care issues for a family member.
“I think there is a story that if told properly, will help people, and businesses in particular, recognize the costs associated with LTC-related issues,” explains Fitzpatrick. “It’s hard to put a quantitative value on the revenue that businesses lose due to [employees’] LTC issues.
“If you lose $15,000 a month on your profit-loss statement, you can say, ‘Oh, that was the photocopier we had to replace.’ But if you lose money to elder-care issues, you’re losing it because people are coming in late, leaving early. And if they’re spending 40 hours each week as a caregiver after work, how much productivity do they bring to the company? Then when they are there, they’re on a search engine doing research to find the best care and services for mom or dad. Corporate America lost $30 billion in 2004 due to elder-care issues. I try to get companies to understand the power of being able to do something from the top down,” to alleviate the loss to all parties.
The key to worksite marketing, however, is to “not get too excited when you actually get the employer and convince him to get started. The important part of worksite LTCI sales is setting up a marketing plan and a schedule in order to market directly to the employees,” says Riekse.
LTCI sales may not be going though the roof, but advisors willing to do some uphill footwork can find gold in the hills.
“There’s no magic potion. There is no voilà!” says Fitzpatrick. “One of the best secrets of success is to have a sincere passion for the products that you are selling, a belief in what it is and what it does, as well as a genuine concern for people’s well-being. That will permeate from within to a client. They will see it in your eyes, hear it in your voice.”