How to Sell Long-Term Care Insurance: Your Guide to Becoming a Top Producer in an Uptapped Market

By Jeff Sadler

The 3rd Edition illustrates successful people-centered, long-term care strategies in wake of today s challenges strategies that sincerely benefit clients while increasing the marketing potential and profitability for financial and insurance planners. Authored by Jeff Sadler, an expert in disability and long-term care coverage with an insurance career spanning more than 30 years. While most people do not consider long-term coverage until it's too late, many financial and insurance planners have yet to establish successful ways to reinforce the manner in which clients will use and benefit from long-term care coverage. Jeff Sadler shows you how to better educate your clients about their long-term care options and increase your sales. You'll learn how to adapt sales presentations, select the most beneficial coverage and capitalize on current trends with this thorough resource guide to the long-term care market. Divided into reader-friendly sections, this book gives you a comprehensive overview complete with stories and statistics illustrating the need for long-term care insurance, the potential funding sources that exist today, a detailed review of the various product solutions available to solve this potential problem, and the current tax and legislative ramifications for the product. A section entitled "Knowledge Is Power" will provide you with a never-ending source of information about all of the various aspects of this market, equipping you with ideas and concepts you can use to educate your prospects and existing clients. This book is the cornerstone to your full understanding of the long-term care market. Sadler delivers: - Time-tested solutions to overcome current sales declines in long-term care product lines - Actual family case examples and statistics on how to capitalize on today's opportunities The books building-block approach clearly outlines: - How to explain client need - How to motivate healthy clients to buy this often-overlooked coverage The topic-specific sections direct long-term care opportunities to: - Individual and group health insurance - Life insurance - 401(k) sales - Annuity sales - Disability insurance - Business planning Financial planning each designed to work with a different type of prospect.

• Language: English
• Publisher: The National Underwriter Company
• Release date: Sep 14, 2012
• ISBN: 9781938130366

Book preview

Cover design: Steven L. Garner

Layout design: Jason T. Williams

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. – From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations.

ISBN: 978-1-938130-36-6

Library of Congress Control Number: 2006928838

2nd Edition

Copyright © 2001, 2006

The National Underwriter Company

P.O. Box 14367, Cincinnati, Ohio 45250-0367

All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the publisher.

Printed in U. S. A.

Dedication

This book is dedicated to the memory of Mike Blackwell, a dedicated insurance professional, and a strong proponent of long-term care insurance, who has and will continue to influence thousands of agents and financial advisors with his financial house concept. It is also dedicated to Gloria Sadler, my first long-term care insurance client, who has now turned 80, and whose 16-year-old LTC policy has never had a rate increase, an arrangement I have probably just jinxed.

Acknowledgements

Any resemblance between this version of How To Sell LTC Insurance and its previous version is non-existent, since I re-wrote it from scratch. Or rather, the market keeps re-writing itself. The ideas presented in this book have been tried first-hand, and only the best survived. Along the way, I have received numerous suggestions from colleagues, agents, and consumers too numerous to mention. I will single out the National Association of Health Underwriters’ LTC Advisory Group, both past and present, who are true inspirations for the sale of this product and the difference it can make in people’s lives. I also acknowledge my wife, Eileen, who lends me a lot of our time to write, and never ceases to be amazed at how long it takes to complete a manuscript. Thanks also to my editors, Debbie Miner, J.D., CLU, ChFC and John Fenton, J.D., MSBA, for their able assistance and patience in seeing this book through to its completion. May it help all who read it!

About the Author

Jeff Sadler began his insurance career as an underwriter in the disability income brokerage division of Paul Revere Life Insurance Company in 1975. Disability and long term care have been the focus of his career, leading to the founding of Sadler Disability Services, Inc. with his father in 1989. The company specializes in national and international agent training, joint field work, and product development in both the disability income and long term care markets. Sadler is the author of The Long-Term Care Handbook, How To Sell Disability Income and The Managed Care and Group Health Handbook as well as numerous articles in industry and consumer publications.

Table of Contents

Dedication

Acknowledgements

About the Author

Introduction

The Challenge

The Consumer

The Agent

The Insurer

Part One

The Agent

Herding Cats

Your Buying Public

Good News Is On The Way!

Initiative One

Initiative Two

Initiative Three

The Sales Agenda

Identifying the Need

Home is Where the Care is

Talk, Talk, Talk

Very Important Reasons to Buy

Transitioning to the LTC Sale

Health Insurance Agent

Group Health Insurance Agent

Medicare Part D

Medicare Supplements

Life Insurance Agent

Disability Insurance Agents

Financial Planners

401(k) Sales

Annuity Sales

Registered Reps

Business Planning Market

CPAs

Volunteering

Females

Working Caregivers

Don’t Miss The Market!

Part Two

Prospecting for LTC Sales

Reasons People Buy Long-Term Care Insurance:

Categories of Prospects

Under-Age-65

Medicare-Age Prospects

Employer Prospects

Getting Started

The Consumer

No Direction Home

Talkin’ ’Bout My Generation

The Greatest Generation

The Boomers

Generation Xers

Pre-Retirees

Women

It’s My Retirement Party, and I’ll Cry If I Want To

Retiree Health Costs

When I’m 64

Take This Job And …

By The Numbers

Talking to Clients

People Who Think They Will Live Forever

The Statistician

The Martyr and the Co-Dependent

The Fountain of Youth

The Accumulator

The Business Owner

Part Three

LTC Funding Alternatives

Who’s Paying The Tab Now?

The Alternatives

Cash

Government Programs

Medicare

Medicare Supplements

Medicaid

Veteran’s Administration

Employers

The Products

A Wide Variety of Products

Tax-Qualified Plans

Plan Design

Covered Services

Cash versus Expense Reimbursement

Individual LTC Policy Features

Premiums

Optional Riders

LTC Partnership Plans

Combo LTC Products

Life Insurance/Long-Term Care

Annuity/Long-Term Care

Federal Government’s LTC Program

Group LTC

Life Settlements

Conclusion

The Industry

The Insurers

Underwriting and Claims

The Regulatory Environment

The Challenge – Revisited

Glossary

Introduction

The Challenge

We have met the enemy, and they are us.

– Walt Kelly, Cartoonist, Pogo

There is no joy in Mudville.

As one of the Marines in the movie Jarhead said, Welcome to the suck.

What in the world is going on here?

Is long-term care insurance ready to meet the Ferryman?

For those that have worked in the long-term care insurance industry for a number of years, the recent downturn in sales has signaled that we are no longer working in the LTC business as usual environment. Even those who have had significant success in this arena have not gone unscathed.

Why the sudden sales resistance? Did we run out of easy prospects? Have we become complacent in our work habits? Have we turned to other, less demanding products to sell? Are we more readily accepting the potential buyer’s natural reluctance to purchase this coverage? Did we go on strike at the same time as the NHL players did?

I have asked a number of insurance agents that sell long-term care insurance what they believe is happening here. To that question, I received a variety of responses:

The insurers raised rates and cut benefits on new contracts, so what did you expect – more sales?

We have picked the low-hanging fruit. Those individuals who simply understood and were motivated to buy this insurance have now done so.

Insurers are abandoning the market, and consumers see that and wonder why buy this plan if the carrier might not be around when you need it?

I don’t have a lot of confidence in the industry right now.

Medicaid is easier to get than most of us think, and people are hearing from their advisors advice such as why buy LTC insurance and waste the money on the premium when the government will take care of you anyway.

People are more concerned about paying for the rising price of gasoline than talking about a new expenditure for long-term care insurance.

I’m too busy with my regular practice of (fill in the blank) to try and fit in long-term care insurance work.

Every agent I asked gave me a different story; it was like an insurance industry version of Rashomon. Is there one answer to the question of diminishing sales, or many?

The current sales slump, in my opinion, is the result of several factors, and any book that purports to be about how to sell long-term care insurance must address these issues. However, none of the above responses should signal more than a minor setback in the quest to cover the masses who need it with long-term care protection.

There is nothing earth-shaking here. But perception, as we know, is often reality for many; and both insurance agents and consumers have made decisions that are affecting this market based on what they think is happening with this product line. Thus, the successful LTC sales agent is going to have to deal with changing this perception, first for himself (or herself), and then for the prospect. The book will focus a lot on this aspect of the long-term care insurance sale.

Always remember this: the need for this coverage has not changed in the last two years. The purpose long-term care insurance serves – as a bank account to pay for specific uninsured and unreimbursed medical expenses – is still the same. That we have sold less as an industry means we have shortchanged some consumers who need this product.

The good news in all of this is that it is easy to get back on track.

Every insurance product brings the same parties to the agreement: the consumer, the agent, and the insurer. Each of them has a share of responsibility for the recent downward slide in long-term care insurance sales. Once you understand why, and how to use this knowledge to overcome challenges in this market, it will be easier to make the long-term care insurance sale.

The Consumer

America may be a nation of red states, but not a nation of Little Red Hens.

– Lee Eisenberg, from his book The Number

Denial.

Fear.

Confusion.

If there is one rule you could be comfortable saying about today’s buying public is that there are no rules. Caught in the tangled web of information that has been woven in today’s mass media overkill, consumers are no longer sure what to believe. Or, more important, it is easy to find concurrence on how they feel about any given issue.

Overwhelmed with the phenomenal amounts of data that come at them daily, it is almost easier to do nothing than make a decision. It’s hard not to be confused, and thus simpler to use that uncertainty to table any difficult decision that should be made.

Boomers are planning on waiting to catch up on their retirement savings (and protection) later instead of dealing with it today, as they stay in what some analysts call a state of financial paralysis.⁷ There is so much contradictory information about how much money will be necessary to comfortably retire, or the number is so large, that it is too awesome to contemplate, and thus inaction is the result.

AARP found that those over age 45, even with all of their bills and an unknown financial future staring them in the face, state that their first priority is to save for a vacation. This leads all other concerns such as paying off medical bills, saving for retirement, and paying off credit cards and loans.⁸

Where would long-term care insurance as a form of wealth protection rank amidst this current state of consumer financial affairs? As you might guess, it isn’t even on most people’s radar screen.

Articles and books about long-term care selling have talked for years about the aging of the country’s population and how this will affect long-term care insurance sales, generally in a positive manner. But the evidence so far indicates that the aging influence has not had much of an impact on long-term care sales.

It was thought that, with retirement in its eyes, Boomers especially would buckle down and see to their financial house. Yet only a small minority has actually done this as survey after survey reveals. Aging alone will not turn on a light inside the brain that says, OK, time to buy long-term care insurance. So far, it hasn’t even motivated the majority of Boomers to start saving larger chunks of money for their future.

If people focus on anything financial, it’s the amount they think they’ll need for retirement and how to get there. Worrying about the Number is widespread, and inspired one of the first non-fiction bestsellers of 2006 appropriately called The Number by Lee Eisenberg.

In his book, Eisenberg dwells on the various approaches to arriving at the Number with insight from a number of people in varied professions, including financial planners. The author owns a long-term care insurance policy, but admits he is in the minority of his friends and associates who have taken that financial protection step.

His answer to how to calculate your Number is it depends. Everyone will live a different retirement, and what you have in store combined with the type of lifestyle you wish to live compared to the way you are living now will all help to determine your individual Number.

He’s right, of course, but consumers want a more specific answer than that. Unfortunately, it doesn’t really exist.

This same thinking can be applied toward explaining long-term care insurance. We are now working with people who are either afraid of their Number, are confused about how much they need, or are simply living in denial about it. In a 2005 study, 95 percent of respondents said they were uneasy about their financial situation in retirement, including 28 percent of those who were most concerned about high health costs draining their retirement savings.⁹ As motivational speaker and author, Michael Pritchard, says, Fear is that little darkroom where negatives develop.

But we do have some concrete numbers for long-term care costs. We don’t have a crystal ball, but we know that for many people, having long-term care insurance protection can mean they don’t need as large a Number as someone else heading into retirement without this added security.

So why can’t we reach these people, or at least the 28 percent who are worried about uninsured health care expenses?

To sell long-term care insurance that will protect the potentially largest bulk of these costs means that we have to motivate healthy people to consider a possible unhealthy future. Who wants to listen to that? The risk of a disability is the song that people hear but nobody listens to – it’s like insurance Muzak.

It’s so much easier to think I’m healthy today, I’ll always be healthy. Denial is a very powerful phenomenon. If you don’t think you’ll ever need the coverage, why buy it?¹⁰ Just put the money into more mutual funds instead.

Isn’t admitting you have a problem the first step towards solving it? That’s our job – to help the consumer recognize this issue – and then to help them deal with it. (Yet, we can’t get state insurance departments to approve CE courses on the psychology of selling.)

A May 2005 online study shows a nation of citizens who are worried about illness, accidents, old age, and death, yet who are unwilling or unable to spare the money or attention required to prepare for what they fear. A substantial majority (79 percent) agree that Americans have become generally more anxious, yet only 16 percent feel up to contemplating the costs of old age and illness, 48 percent prefer not to think about the costs associated with illness and death, and 41 percent say that, at this point in their lives, they don’t have the money to spare for insurance.¹¹

Now that’s a challenge!

We focus rightly on the Boomers today as our largest nest of consumers who should be taking action steps toward retirement planning including considering wealth protection vehicles like long-term care insurance. But this is the generation who invented instant gratification. It may be years before a long-term care insurance policy is needed and starts paying. We need to demonstrate the value of the early purchase of this product in order to be successful here. Or, we’ll get phone calls like this one:

Boomers probably haven’t learned anything from the Silent Generation ahead of them, now aged between 64 and 81, many of whom may still be long-term care insurance prospects. According to a June 2005 MetLife study, members of the Silent Generation worry frequently about health care costs and stock market downturns, but are not as concerned about longer-term issues such as outliving their retirement savings or the possibility that they will need to provide care to a family member who becomes chronically ill. Many pre-retirees and retirees say they never worry about longevity risk.¹³

Boomers can rationalize almost anything. Can we help them rationalize long-term care insurance as a vital wealth protection element for their future plans?

Consumers are badly in need of a wake-up call. It may now be coming in the form of extensive cutbacks in retiree health care by major corporations. The auto industry is the latest one to realize that there are far too many people to take care of than they had ever forecasted and if they want to be competitive in a global market, they need to price their cars and trucks to move.

Personal responsibility for these expenses is here – that will be a 21st Century motif. Is the insurance agent up to the challenge of helping consumers face it?

The Agent

It seems rather incongruous that in a society of super-sophisticated communications, we often suffer from a shortage of listeners.

– Erma Bombeck

Earlier in this section I quoted the various reasons insurance agents gave me for their recent lack of or reduced LTC sales. More disturbing to me than the answers was the attitude – many of these agents have given up and moved on to other products.

The industry has challenges – that much we know. Dealing with consumers playing ostrich and insurers who have panicked first about how much LTC they were selling and then how little, is a severe test.

But it is the hand we have been dealt. It’s not like the game of Scrabble, where you can throw in your tiles, skip your turn and take a chance with a new set.

The long-term care insurance market has some of the attractive features we’ve always sought – wide-open groups of prospects, media recognition and coverage of the problem, continuing messages from the government advising people that they are on their own for this problem, a few solid but dedicated insurers, and an easy need to explain.

Moreover, I believe we have a moral obligation to assist consumers in seeing the importance of this coverage. Without us, they are likely self-insuring this risk. Financially, that has proven to be a disaster