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Takeaways From A Tough Week In Long-Term Care Insurance

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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

Start The LTC Conversation With Innovative Marketing Materials

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Let’s Talk Email Campaign

November has been declared Long Term Care (LTC) Awareness Month by the American Association for Long Term Care — take advantage with the help of Broadtower and its new client marketing campaign. The “Let’s Talk” campaign will grab your client’s attention and get the Long Term Care Insurance (LTCI) conversation rolling.

  • Client Email Campaign
    This turn-key marketing email can be customized specifically to your business and will initiate your successful campaign, generating new leads.
  • Client Brochure
    Use the “What’s Your Plan” client brochure as a tool to start the conversation about incorporating LTC coverage into your clients’ financial plans

Access The Campaign Materials

Initiate an LTCI planning conversation with your clients, raise awareness, and increase your ROI this November with new sales and marketing tools from Broadtower Insurance.

Connect and engage your clients with additional LTCI industry resources:

  • Video
    Educate your clients through an assortment of videos which you can incorporate into your online marketing outreach.
  • Social Media
    Attract your customers with prewritten social-media content to post to your social profile pages.
  • Flyers
    These attention-grabbing flyers can be sent digitally or downloaded and printed out.

Aggregation Of Marginal Gains – The 1% Difference

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Recently, I came upon a concept that can help anyone’s sales performance not to mention their lives in general. It’s a training idea that has become quite prominent in Great Britain ever since Team Sky became an international powerhouse in cycling, winning both the 2012 and 2013 Tour de France. The aggregation of marginal gains is elegant in its simplicity and powerful in delivering results.

Sir David Brailsford (it seems that everyone becomes a “Sir” in Britain once they’ve achieved some degree of fame) became the coach of Team Sky, the national cycling team of England, in 2010. Never a powerhouse in this popular sport, Brailsford believed his team could overcome the trend towards doping and become champions by focusing on the small details of their craft and improving each one by 1%. Small changes in nutrition, health habits, tyres (English spelling) and clothing would aggregate into big gains. Within three years Team Sky achieved Tour de France and Beijing Olympic victories.

I was made aware of the concept of aggregation of marginal gains in a brief presentation on practice management. When I did a web search of the term, I discovered that the theory has become very popular in British business circles as a successful training model. Small positive changes in habits, communications and methods can reap big benefits for any business or sales professional.

The key take-away of this concept is that you don’t have to make big changes to achieve new levels of success. Small incremental upgrades to your thinking, habits and business offering can add up to major increases in your bottom line.

What does this have to do with long-term care insurance marketing? Over the years, I’ve discovered that BGAs and agents who consistently and persistently add long-term care planning to their day-to-day marketing conversations will see improved sales. Here’s an example: a few years ago a broker in Southern California with a multi-line agency, P & C, life and health insurance and investments, added the following question to his daily conversations with clients; “have you taken care of your long-term care planning yet?” This small change catapulted our agent to long-term care insurance sales success. He’s became a consistent top producer of traditional LTCi and now he’s embraced linked products.

Brokerage general agents have more long-term care liquidity options in their product portfolios than ever before. Add the LTC planning conversation to your day-to-day discussions with agents and advisors. This small change will create more sales and add to your bottom-line.

Transamerica Consumer Awareness Video – Long Term Care Planning

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Long Term Care Awareness Month is upon us. With national media attention there’s no time like NOW to encourage your agents and advisors to ask an important question of their clients and prospects; have you taken care of your long term care planning yet?

Transamerica has produced a short, hard hitting consumer awareness video that you should consider sending to your entire contact list.

Click Here to View

Broadtower Insurance Solutions, Inc. is proud to represent the best in long term care planning solutions; traditional and linked. Please contact us to learn how we can help you make long term care insurance a significant profit center in your agency.

Easy Answers

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We are all of course guilty of succumbing to the temptation of embracing easy answers. However, sometimes it seems our own profession may have a particular affinity for simplification excess.

This is evidenced by a statement I heard recently from the committee examining the wide, and growing world of Combo Products. “Hybrid, Linked and Combo products are the fastest growing segment of both life and long term care insurance.” When you add asset based long term care sales we have a several billion dollar industry with stand- alone LTCI sales accounting for only about $500 million. The interesting question is how much of the current life production is written with some form of chronic illness benefit? The current “guess” is approximately one third. This number will continue to grow as more companies move aggressively to provide some form of living benefit.

These riders are being produced across a very wide spectrum of quality and intent. I am concerned that many may not clearly understand what was sold or in some cases automatically included in their life policy. I am also concerned that consumers may not clearly understand what they bought..

Any leveraging of risk is of course preferable to ignoring the problem. It is also very helpful that we have so many more choices.

Here are a few of the questions that come to mind:

  • How can you sell any version of Long Term Care protection and not be trained or certified to have that conversation?
  • If you offer a benefit do you not have a responsibility to at least offer the lowest net cost to pay for the risk?
  • Did you evaluate 1035 opportunities before recommending any particular new coverage?
  • Did you clearly explain the difference between LTC ‘health’ riders and LTC ‘life’ riders?
  • Where do you place Long Term Care ‘Planning’. Is this a Health or Estate or Asset Management planning process or some mystical combination of all the above?

The ability to conveniently address more than one need for protection with one sale has always been attractive. The current popularity of this approach as it relates to LTCI however requires an understanding that the temptation of easy answers must be resisted. There is no one right answer, each situation is unique. Begin as usual with a careful review of what is already in place. What could be exchanged at what cost? How best do you enhance LTC protection and what is the net cost of those recommended options? We have not found a new, easy answer or an easy way of avoiding a more comprehensive conversation about all the insurance options. The truth is complicated and requires training in all the available solutions. The best answer may actually require a little of this and a little of that. Learn to Mix and Match with confidence and enthusiasm A frank and open analysis of all the good and all the bad of all the choices is best. Companies, agents and consumers need to abandon the quest for that “Easy” red button. Other than that I have no opinion on the subject.

Tax Deductible Premiums And Tax-Free Benefits For Business Owners

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If you’re in the group health marketplace or work with business owners, you’re getting ready to bring “news”: good, bad or indifferent, to your clients regarding ACA’s impact on their lives in 2015.  We understand your pain and theirs; we’re business owners and the impact on us and our employees in the past 18 months has been mostly unpleasant.

That being said, you can bring good news to business owners who are concerned about preserving their retirement income and their assets.  As we’ve said many times: traditional long-term care insurance benefits are always received tax-free; and for business owners the premiums are partially or fully tax deductible.  The benefits of this should be obvious.  Business owners can protect their income and assets with highly leveraged, tax-deductible dollars.  This is a great message to bring to clients who are getting squeezed by higher health insurance premiums and taxes.

This approach works for sole proprietors as well as for businesses with W-2 employees.  If there are at least three employees (including the owner) they get another advantage: simplified underwriting!  Your eyes are not lying!  Virtually every employee working in a company with three or more lives will qualify for long-term care insurance (ages 65 and younger), if they can answer “no” to a series of knock-out questions on a simplified application.

Here are the rules in a nutshell:

  • LTCi is available for groups of three employee lives and up.  The rules are more flexible as the groups get larger.
  • Groups 3 – 9: minimum of five approved applications, including spouses, to get Simplified Issue (“SI”).  Employer pays 100% of a defined benefit design for all applicants.
  • Groups 10 – 74: minimum 10 approved applications to get Simplified Issue.  Employer must contribute at least $25 or 25% of defined plan design monthly to get Simplified Issue. Spouses can qualify for SI if employer contributes for them.
  • Groups 75 – 499: can be voluntary, no employer contribution required; minimum 10 approved applications to get SI
  • Groups 500+: voluntary, 25 approved apps to get SI
  • All multi-life groups get the multi-life premiums; employees or spouses for whom employer contributes the minimum for each group size, get an additional 5% discount.
  • Additional discounts apply in most states for having a spouse/partner whether they apply or not, and a larger discount if spouse/partner applies and is accepted

The insurance company for this excellent simplified underwriting program is LifeSecure, a wholly owned subsidiary of Blue Cross/Blue Shield of Michigan.  The benefits are easy for consumers to understand and the rates are very competitive, particularly in California.  It is also available to individuals on a fully-underwritten basis.

In today’s uncertain economy, you have a duty to discuss the need for long-term care planning with every client.  Tax-free benefits are always in play for any consumer who purchases a traditional long-term care insurance policy.  Tax-deductible premiums are of great value to nearly every business owner, and simplified underwriting for employer groups with three or more employees sweetens the pot.

Take this good news out to your clients; they’ll thank you for it.