Broadtower Base

Barry Fisher

The Reports Of My Death Have Been Greatly Exaggerated – Mark Twain

By

“Much the same could be said about the long term care insurance industry, but first these headlines:

  • There are more options for long term care insurance products/planning solutions today than in recent memory.
  • Three distinct classes of policies/programs have risen from the ashes of the long term care insurance heyday of the mid-2000’s:
    • Traditional
    • Hybrid and Linked
    • Long term care planning for people who failed to plan
  • The game will be won by proactive agents and BGAs that focus on the consequences of not planning for an extended care event (thank you Harley Gordon), and by fitting the right client to the appropriate liquidity and underwriting solution.

Pollyanna I am not.  But a clear-eyed view of the shifting tectonic plates in the world of long term care planning informs me that much positive energy and change is upon us.

A high-level perspective of the situation indicates that public policy concerns and private sector innovation are actually beginning to help consumers.  Federal and state initiatives are focused on…”

Click here for the full article, originally published in the November 2016 edition of Broker World Magazine.

Long-Term Care Planning for People Who Failed to Plan

By

One thing is certain; when your phone rings and the client WANTS long-term care insurance, it’s often too late to help them with traditional product options. Or, when you get the call asking if you can still get coverage for their mom or dad because they just moved them into a care facility, your heart sinks.

The simple answer “NO” doesn’t express the needed empathy in the situation, so you spend 15 to 20 minutes commiserating, and encouraging them to get their long-term care planning squared away.

Those who have failed to plan with traditional or linked product choices are generally faced with two options:

  1. Folks with modest means, intent on controlling the care they receive, must supplement their fixed retirement income by liquidating other assets to pay for care. Two additional complications often raise their ugly heads: there is another call on the retirement income and assets, namely the healthy spouse. Also, liquidating an income-producing asset to pay for care reduces retirement income and may create a tax issue. Talk about adding insult to injury.
  2. Wealthy clients may have the income and assets to pay for whatever care they desire. However, an open-ended drain of treasure could negatively impact heirs or other family members the client had hoped to provide a legacy for. In this case it would be helpful to create a wall or stop-loss to protect that inheritance.

One thing both these sets of consumers have in common is the need for leveraged cash flow enhancement. This is a knotty problem indeed; particularly since the horse has already left the barn! The good news is: you may be able to offer solutions to consumers who face the costs of long-term care without insurance (or adequate coverage).

The financial planning instruments I’m about to share with you are not new, but they include innovations designed specifically for those in need of leveraged cash flow enhancement. Before sharing details, it’s important to note that these are not your typical insurance product or sale. In presenting these options, you may be working with the family member(s) who hold the power of attorney for the actual client in need. You also should be mindful of other financial planning or legal professionals in the decision making process; e.g. elder law attorney, stock broker, CPA, etc. Finally, don’t forget the family members who aren’t in the decision-making loop but may be “expectant heirs”. With this landscape a word of caution is in order: don’t be the “Lone Ranger.” Make yourself part of the circle of advisors who are trying to help a client in need.

The first opportunity involves a growing movement by State and Federal governments to provide consumers additional private funding options to pay for care. A number of states have passed enabling legislation to encourage those in need to create Long-Term Care Benefits Plans.

The funding vehicle for these plans are life insurance policies that are converted into life settlements. What makes this different from your garden variety life settlement?

  • The converted life insurance policy used to fund the Long-Term Care Benefit Account must be placed in an irrevocable, FDIC-insured account that makes payments directly to the care provider;
  • The person must be able to choose the form of care they want;
  • A funeral benefit must be preserved: generally, the lesser of 5% of the face amount of the life insurance policy or $5,000 is reserved as a death benefit payable to the estate or beneficiary;
  • Any unpaid balance in the account must be paid to the estate or named beneficiary.

According to Conning & Company Research, seniors in the United States own approximately $500 billion of life insurance. Many can’t afford the premiums as they get older, particularly if long-term care expenses begin pressing on them. In fact, when they do stop paying premiums, they received less than 10% of the face value, and 88% of policy holders receive little or no value. Thirty-eight percent (38%) needed to liquidate their life insurance policies to qualify for Medicaid.

Market opportunities to consider include:

  • Owners of life policies $50,000+ in danger of lapse or surrender
  • Families with immediate need to fund care for a loved one
    • Desire to remain private pay vs. Medicaid
    • Applicants declined for long-term care insurance
    • Parents of clients who have purchased LTCi
  • Financial advisors trying to help someone who needs care
  • Individuals already in need of care

On another front, Genworth has recently introduced a single premium immediate annuity (SPIA) that is also a new twist on an old idea. IncomeAssurance Immediate Need Annuity has its origins in Great Britain, where underwritten annuities specifically designed for enhanced cash flow based on mortality and morbidity were developed.

The profile for individuals suitable for this product are those previously discussed. They need to maximize their income to pay for care for however long they need it, and not run out money. They can also use IncomeAssurance as a stop-loss to wall off an unknown catastrophic risk.

Individuals aged 70 to 95 who are currently self-funding long-term care expenses by liquidating assets can enhance their cash flow without endangering their entire nest egg. They can also include annual cost-of-living adjustments to the monthly payouts and purchase death benefit options as a hedge against untimely death.

Let’s be clear: there is no substitute for long-term care planning for healthy people in their 50s, 60s or even 70s utilizing traditional or linked insurance products. However, as discussed in previous writings over the past 18 to 24 months, new products and concepts are being created in response to an anemic traditional insurance market and an aging demographic of those who failed to adopt an adequate insurance program. These solutions can help people enhance and safeguard their cash flow when they require care, although they don’t provide the leverage of traditional insurance products.

Agents and advisors, like their clients, cannot run away from the long-term care planning need. You currently have two new options that may answer the age old question, “what do I do now?” when consumers are declined for long-term care insurance or they are already receiving care.

Confessions Of A Long-Term Care Insurance Underwriter

By

Learn the secrets of higher placement rates and increased LTCi sales profitability from one of the leading companies and underwriters in the industry.

Join Mutual of Omaha’s Long-Term Care Insurance Chief Underwriter, Demerri Bond, RN, BSN, and your Broadtower Insurance Solutions Team for what promises to be one of the most important and valuable webcasts of 2015. Here’s what you’ll learn:

  • Proven techniques to help you pre-qualify prospects over the phone
  • How to best use home office underwriting guides and call-in lines
  • Top 5 declines and how to avoid them
  • “Ask the Underwriter” the #1 question most on your mind

Kick-off the fall and winter selling seasons with valuable and actionable intelligence that will lead you to long-term care insurance sales success.

Event Details:
Date: Wednesday, September 16th, 2015
Time: 10:00 AM – 11:00 AM PDT
Space is limited
Reserve Your Webinar Seat Now

 

Producer Assist Comes To Broadtower Insurance Solutions

By

In our ongoing efforts to help agents and advisers raise consumer awareness in long-term care planning Broadtower Insurance Solutions and Genworth Financial are pleased to provide Producer Assist to its valued distribution partners on a national basis. This cutting-edge program is designed to assist insurance advisors and their clients in choosing the most suitable planning options for providing liquidity to pay for long-term care.

Recently one of our member agencies got this email from an agent:

“I met with Doug Hayden, CLTC, Genworth, this morning.  Thank you for the opportunity to have Doug as a resource person for me.  I found our meeting to be invaluable.  After thirty five years in the industry, I became uninformed in the Long Term Care market.  I was really out of date since it had been several years when I sold my last Long Term Care policy.  Doug was extremely instrumental in bringing me up- to-date, reminded me how to position myself and brought forth ideas on how to create affordable solutions.    

On a scale of 1 to 10, 10 being the highest score, the value to me scored 10.”

– Linda Harris, Harris Insurance & Financial Services, San Diego, CA

In order to create a template for success a test group of our member agencies have introduced Producer Assist to their brokers.  The results are in and they are dramatic.  Agents appreciate the contact and training they receive from Genworth RVPs, proposal activity for all companies we represent are up because agents are talking to their clients about long-term care and the pace of new business is on the rise.

Agents and advisers participating in Producer Assist can expect the following:

  • Best practices for establishing their firm as a long-term care center of excellence;
  • How to effectively start the long-term care planning conversation with clients;
  • Training for agents and your staff on the basics of long-term care planning and insurance;
  • How to determine the most suitable product choices for each prospect;
  • How to create an ongoing stream of long-term planning referred leads;
  • Special training opportunities.

Producer Assist is product-neutral.  This means that while the Genworth RVPs will do both generic and product-specific training, your agents will continue to work with you and your marketing staff for specific client/case development and proposal preparation.  A rising tide lifts all boats, and Genworth believes that by helping you build your business they will get their fair share of it.  Producer Assist is a win-win for you, and the long-term care insurance industry as a whole.  Do not miss this exciting opportunity to expand your business and help your agents and their clients.

A number of you have expressed an interest in getting Producer Assist up and running in your agencies.  We’ve passed this information onto D.J. Mormile for follow-up. If you haven’t yet decided whether Producer Assist is for you please contact Ron or Barry for more information.

LTCi Underwriting: Take The Pledge!

By

Vigilance is in order! Declines, NTOs and Withdrawn applications are ‘killing the goose that laid the golden egg’ – placement ratios are the life blood of our long-term care insurance business. Bonus dollars are critically important to all of us, and they are now in peril!

We all know:

  • There is nothing easy about the sale, underwriting or placement of LTCi. Successfully completing the process is mandatory. Wasting time and money on apps that cannot be placed is simply foolish.
  • LTCi is acquired with the clients’ good health.
  • Commissions and bonus is the manna that keeps us in the game.
  • A decline or false start with an LTCi application helps no one and harms everyone from the customer all the way to reinsurance.
  • Potentially every consumer that reaches out to buy is probably the worst possible prospect. It usually means they know something about their health, or family history that makes getting them insurance a problem.
  • That’s why our real job is to help agents SELL AND PLACE quality LTCi – not just take orders for bad business!

Some helpful hints:

  • Someone is almost always pulling your leg. Whether the health questions are on the application or not – always do you own prescreening.  Ask the questions, never accept business without adequate field underwriting.
    1. Who initiated the request for the quote
    2. Height and weight
    3. All Rx medications
    4. Recent or anticipated surgeries
    5. Family history
  • In point of fact – why even quote a case that has no hope of success?
  • Always manage expectations
    1. Quote the correct and anticipated rate class
    2. Internalize the absolute certainty that nothing will “slip through” underwriting. If Para-Med exams are necessary, all health issues will be revealed.
    3. Prepare the client for rate class adjustments – exams, cognitive testing and the possibility that one spouse may not “make the cut”.
    4. Incomplete paperwork, or agent training certification being out of sync, will result in major delays – increasing the possiblity that applications may whiter on the vine or may have to be retaken

‘Preaching to the choir’ – more helpful hints:

  • Take full advantage of the carrier underwriting ‘hot lines’. If there is any doubt at all, call and be sure to document the call.
  • Recommend the use of e-applications, where we can monitor the apps before actual submission.
  • If the company application does not ask the medical questions – you and the agents must do it anyway.
  • LTCi agency support personnel must attend upcoming Broadtower Underwriting Training Webinars

Hand on your heart — please commit yourself and your team members to stop this very expensive waste of administrative dollars and damage to bonus profitability!

The bottom line is LTCi protection is more important than ever for all concerned, and it is more difficult to obtain. We must continue to try to complete this arduous process successfully. We must work together to make certain that we can maintain the margins necessary to continue to help as many as possible. Your immediate help and focus on placement ratio issues is required.

Take The Pledge!

Profitable LTC Insurance Sales

By

Traditional long-term care insurance placement rates have plummeted over the past 18 months due to more rigorous underwriting requirements. Declines on one spouse or the other and policies issued at rate classes greater than applied for have caused a spike in policies not taken or accepted by one or both of the insureds. The consequence of this is lost profitability to the producer and general agent. We spend untold hours running quotes on prospects without the faintest idea if they will qualify for coverage due to health reasons; additional time and resources processing the cases; and countless hours talking to underwriters on the phone trying to get them to change their minds in a no-wiggle room environment. Ultimately, the producer aggravates potential new customers or alienates existing clients.

The reality is that producers and general agents don’t make the rules. When companies across a market segment harden underwriting we have two choices; find another product to sell or adapt tactics. In light of the fact that many of us are committed to long-term care planning – how can we continue to help consumers in this difficult environment? There’s a simple answer; get better at field underwriting the clients’ health profiles before beginning the quoting process.

This not so revolutionary concept is easily accomplished by any producer or advisor. A brief review of one or two insurance company underwriting guides will provide the basic questions one needs to ask prospects and clients. Most general agent marketing teams also have a one page health questionnaire that can be used to guide producers through the primary issues that impact long-term care insurance underwriting decisions. The four primary items one must know are:

  • Height and weight;
  • Tobacco use;
  • Recent major health issues or surgeries that may be pending;
  • Current prescription medications being taken – very important as it is indicative of what may be ailing someone

With this basic information the general agent’s marketing team can zero-in on insurability and/or rate class. They can also recommend the insurance company that is most likely to look favorably on the prospect’s health issues. The producer appears professional because they’ve done some meaningful research for the client, and the chances of an unexpected underwriting decision are mitigated.

My marketing teams tell me that “producers just want to know how much LTCi costs”. Candidly we cannot answer this question, with a reasonable level of accuracy, unless we know what sort of health conditions the prospect may have. One of my mentors used to say that long-term care insurance is an inherently sub-standard market since we’re dealing with older consumers. This was when the average age of issue was 67. Today the average issue age is 56, but with modern medical technology and drug treatments disease processes are identified earlier and most people are taking some sort of prescription medication.

Doesn’t it make sense to ‘put the horse in front of the cart’ by getting basic vital health information from the prospect before a proposal is presented? Who wants unpleasant surprises after the fact? The process goes much smoother, everyone’s valuable time is not wasted and selling long-term care insurance becomes a profitable endeavor.

Lest We Forget…

By

Recognizing the pressing need to increase long-term care insurance sales, our focus has turned away from “the date” that brought many of us to the dance. Bright shiny objects such as linked, hybrid and combo products, while adding to the consumer’s long-term care planning choices, has also created a bit of a muddle. The desire to sell “less to more” may be a great concept and the right thing to do, but the prolonged economic non-recovery and the increasing dollars sucked up by the Affordable Care Act have shoved aside the notion that middle-class consumers can squeeze another $100 per month for LTCi out of their budgets.

One thing that 39 years in the insurance business has taught me, is that we tend to forget what worked for us in the past. We get so wound up in the latest new product or untested sales idea that we stop talking to the right clients about tried and true solutions that work for them. As I look back on our past successes, the one that stands out is the 10-pay corporate carve-out sale for owners of small companies. In an environment of increased income taxes, what better way can a business man or woman protect their personal assets with tax-deductible premiums and tax-free benefits?

Now I grant you, this is not a mass-market sales idea. But if you have business-owner clients who are still making money, you know they are looking for tax-deductible ways to plan for their future. The good news is: you have a great way to help your clients do just that, and you don’t need many of these sales to make a significant impact on your bottom line.

Here’s what I’m talking about.

The most important metric to consider when presenting this option is:

How many years of annual premium does the total 10-pay premium equal?

For example, when Susan and I purchased our first 10-pay policy with Allianz in 1997, the total 10-pay premium equaled 19 years of annual premium. When we purchased our second policy with State Life in 2003, the equivalency was 23 years of annual premium. In the latter case (adjusting for benefits and age) we paid approximately $90,000 in 10-pay premiums from 2003 through 2012. If we had done this on an annual “forever-pay” basis the premium would be approximately $4,000 annually. I’m pleased to say that both of these were smart purchases. We now have more long-term care insurance than we’ll ever need, and the value of it increases every year because of the automatic benefit inflation option. And, our premiums will never increase because our policies are paid up.

In the mid-to-late 2000s, a number of companies jumped into the 10-pay arena, but they weren’t serious about selling much because total 10-pay premiums were equal to about 35 years of annual premium. So what happened? We stopped presenting them because the numbers didn’t make sense. We moved on to other ideas and failed to pay much attention to limited-pay policies. However, new developments make it highly desirable to reconsider the 10-pay option.

LifeSecure, one of our top traditional long-term care insurance companies, continues to offer a 10-pay option, and for the right client, total 10-pay premiums equals about 25 years of annual premium.

Here’s an example:

  • Couple 57 & 52
  • $6,000/month benefit each
  • Two $600,0000 pools of money + shared care benefit
  • 3% automatic compound inflation
  • 90 calendar day elimination period
  • Standard Rate Class
    • Annual “forever-pay” premium = $6,060
    • Annual 10-Pay premium = $15,096
      • Total of 10-pay premiums = $150,960
      • Equivalent to 24.91 years of annual premiums

 It’s important to note that the 10-pay premiums can increase during first 10 years of the policy, but after that the insureds are out of the premium-paying woods. The value of their monthly benefits and their pools of money continue to automatically increase by 3% compound annually for the life of their policies. If they own a business, they’ve paid the premiums from it, so all or part of the payments are tax deductible. Oh, and did I mention that the benefits when received are tax-free?

How would I present this idea to the client?

First I’d show the annual pay premium and get them to agree on the value proposition of what you’re proposing. Don’t forget to take along our Pool of Money presentations that shows they can’t invest their way out of the problem. Then as a final option, present the 10-pay premiums as perhaps a smarter way to go. Discuss the benefits and see what they say; you may be pleasantly surprised.

Now consider this:

Many small businesses have multiple owners who are struggling with paying higher marginal tax rates on income. If they convert some of that income to an executive employee fringe benefit, they would save on their taxes and protect their personal assets.

One more thing:

LifeSecure does not reduce the first-year commission when the 10-pay option is chosen. Renewals are reduced, however if you compare the total 10-pay vs. annual pay commission payout for the first 10 years of the policy the 10-pay beats the annual pay by 20%.

The conclusion is that for right client, the 10-pay premium option is a time-value of money winner for them and you.

Takeaways From A Tough Week In Long-Term Care Insurance

By

Last week Genworth announced a series of claims reserve actions that caused its stock price to tumble and then rebound slightly. After reading the reports and attending a conference call with Genworth Senior Management on Friday, I can tell you not to panic. However, this change of course by the nation’s leading writer of traditional long-term care insurance should cause us to reflect on our assumptions about long-term care planning. It also makes sense to review our efforts as insurance advisors to help our clients create sufficient liquidity to pay for care.

My first impression is that Genworth acted responsibly in reviewing and bolstering its claims reserve by $345 million. They are also committed to staying in the long-term care insurance business. Both of these facts should reinforce broker and consumer faith. Let’s remember that less than three years ago, UNUM withdrew from the long-term care insurance market when faced with the same need to restate its reserves for claims payment. Genworth’s revisions assure policyholders that adequate reserves exist to pay their claims. Actively continuing to sell traditional LTCi means newer and more profitable policies will reinforce and ultimately replace older and less profitable blocks of business.

Here are some of my key takeaways from last week’s announcement:

  • The reserve action applies to 50,000 policies currently on claim;
  • Higher than anticipated length (duration) and amount (utilization) of claims are cited as primary reasons for the action;
  • The new claims data is an update of a “deep dive” into claims results completed in 2012;
  • Policies impacted most were issued prior to 2002;
  • The extended low-interest-rate environment continues to be a significant factor in creating the need to bolster claims reserves;
  • Policyholders are living longer than originally anticipated (on and off claim) and policy lapse rates continue at less than 1%.

Considering all this, I would expect a quickening pace of in-force premium increases on policies issued prior to 2002. However, before you start hyperventilating, allow me to reiterate some important points:

  • Based on this claims review, anticipated increases are justifiable;
  • Policyholders with these older policies have been paying premiums far below what they should have been paying for many years;
  • Thus they’ve had the advantage of rich coverage and the time value of money;
  • Experience tells us that if a consumer could qualify for a new policy today at their current age, the premium would be considerably higher than what they’ll pay after they receive an in-force premium increase.

Some issues to consider pertaining to newer blocks of long-term care business are:

  • The impact of more rigorous underwriting;
  • Effect of more policyholders purchasing inflation protection;
  • Fewer policyholders with lifetime benefits.

How might this effect the traditional long-term care insurance industry as a whole? My guess is that other insurance companies will take a new look at their claims experience and adjust accordingly. Their reactions in this regard may or may not be revealing. I do continue to believe that we have a core group of carriers committed to traditional long-term care insurance, provided they can profitably manage their risk. State departments of insurance and interest rates will be key factors in this calculus.

All this being said, I will echo Genworth senior management’s belief, that for consumers, the long-term care risk is not going away. Providing liquidity solutions for long-term care planning is critical to our society, and I believe Genworth is committed to being an industry leader in this arena. This does not mean that they or any company is going to get it right 100% of the time.

We as agents and advisors need to be realistic; we’re dealing with an accident and health insurance product. Compare the rate increases consumers receive annually on their medical and Medicare supplement insurance policies (not to mention policy cancellations and benefit reductions caused by the ACA) to the in-frequent in-force premium increases on traditional long-term care insurance, and I think you can achieve some perspective. I’ll also remind you that millions of dollars of long-term care insurance claims are being paid daily by numerous companies, relieving the financial and emotional burdens of countless Americans.

It’s not time to panic or to throw in the towel. If you’ve been selling long-term care insurance, be proud of the good work you’ve done. If you’re concerned about going forward, be glad we have responsible insurance companies who are taking appropriate actions to assure our policyholders that the promises that you and they have made, are kept.

For more information on Genworth’s Q3 adjustments click here