the finance of longevity

The Persistence of ‘Need'

Don’t Lose the [LTC] Forest for the [LTCI] Trees

by Bob Vandy, CLU, ChFC, LUTCF, CLTC

Mr. Vandy is V.P. Marketing for New York-National Long Term Care Brokers. Please visit here.

Do any of these anecdotes sound familiar?

  • I heard standalone Long-Term Care Insurance (LTCI) is going away
  • All the carriers are getting out of the LTCI business
  • My clients are scared about LTCI rate increases and I hear they are going to continue
  • LTCI is tough to get issued
  • My clients don’t like buying insurance they may never use (e.g. LTCI)

The raw reality is that each of those – presuming those are valid client or prospect objections and not simply predispositions on the part of the agent or advisor – may be genuine and may be holding your client back from putting much-needed coverage in place to protect themselves and their loved ones.

As we wrap up 2016, and begin to look toward 2017, here are some things to keep in mind about those concerns, and how we might actually use them to have productive planning conversations with those same prospects and clients:

  • The first, and main, point of this article is this: regardless of the changes in LTC protection products, or carriers, or pricing, or underwriting, one thing is abundantly clear – the one thing that is NOT changing, and will NOT change any time soon (in fact, most would argue it will become more important, not less)…is the NEED! Your clients and prospects need protection against the consequences of an extended or chronic care event, and the solutions in the insurance market today – while they may have changed quite a bit in recent years – are actually more plentiful and flexible than they have ever been. As an advisor, you just need to help them find the right fit.
  • “LTCI is going away and Carriers are exiting the business?” – while it is true that a number of carriers have exited the standalone LTCI market recently, there are two points to consider:
    • First, there is still a very viable standalone LTCI market – in fact, as of the writing of this article, there are still about 12-14 carriers underwriting LTCI1 – 6 of them in the brokerage market2 – and many of those remaining have recently reiterated their commitment to the market.
    • Second, we heard similar cries back in the mid-1990’s, when the individual Disability Income (DI) Insurance market contracted because of a number of market forces. The result? A very viable individual DI market today, albeit with a smaller number of carriers underwriting new business, and some relatively stricter underwriting guidelines than previously. Why? Well, in large part, the NEED did not go away!
  • Clients are scared of rate increases – this is certainly understandable, as clients want to make sure they can sustain premiums for insurance – and other expenses – as they move into retirement. That said, while the recent phenomenon of rate increases has been, at times, more frequent and to a greater extent than anyone anticipated, one might reasonably argue that the economic and market forces that led to those increases (the biggest ones being the prolonged, unprecedented low interest rate environment and unanticipated high persistency rates – resulting in much lower carrier revenues and much higher claims than expected) are now “baked into the [pricing] cake,” thus mitigating future rate increases to an extent.
Ultimately, the worst thing your clients can do is to do nothing to protect themselves and their loved ones from the potentially devastating impact of an extended care event, until it is too late.

Think of it this way: the bad news is premiums for LTCI are, on average, 3-4 times higher than they were, say, 10 years ago. The GOOD news is that premiums for LTCI are, on average, 3-4 times higher than they were 10 years ago (and thus, arguably, more correctly priced now and more insulated from future rate increases).

  • “LTCI is tough to get issued” – this is another one of those similarities with the DI market evolution. The more claims experience we have as an industry, the more we understand about underwriting, and any necessary changes. The truth of the matter is that we, as an industry, allowed people in LTCI’s early years to secure LTCI who probably should not have. We are paying the price for that now (in the form of much higher than expected claims), and the result is that, among other things, it is more vital than ever that we (a) reach out younger prospects than we have been accustomed to in the past (many feel the ideal time to have the care planning conversation is between the ages of 40 and 55) and (b) gather as much information about a prospect’s health, and seeking opinion from qualified underwriting personnel (many brokerages, like ours at NY/NLTCB, have qualified underwriters on staff to consult with on cases), BEFORE submitting those applications.
  • “My clients don’t want to buy insurance they may not use” – there are two very important points to consider here:
    • First, the statistical likelihood of a LTCI policyholder making a claim is MUCH higher than virtually any of type of insurance. Do your clients not buy homeowner’s insurance (or drop it after they pay their house off), or auto insurance (or just keep the state mandated minimum coverage), or liability insurance, simply because of the much lower probability they will ever use it? Why, then, do they – or we – view LTCI differently?
    • Secondarily, if your clients or prospects find themselves emotionally unable to move forward because they “may never use it,” it is important for you to keep in mind as advisors that many of the newer insurance based LTC planning solutions available today can ensure that, regardless of whether you client needs LTC/Chronic/Extended care services, money will come back to them, or their estates.

Theodore Roosevelt once said, “In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.” Ultimately, the worst thing your clients can do is to do nothing to protect themselves and their loved ones from the potentially devastating impact of an extended care event, until it is too late.

So, remember to take action NOW – consult with your LTC planning resource for the various planning options – with your clients and prospects about their extended care planning and DON’T “Lose the LTC Forest for the LTCI Trees!”

Good Selling!!




1 Depending on state of issuance
2 Depending on state of issuance