In our last Article, The Blind leading the Blind: State of Confusion in the LTCI Industry 2017 Holiday Edition (part one), we shared the results of a recent national LTC Survey conducted by Genworth in the 3rd quarter of 2017 that eventually highlighted American Consumer ignorance about Long-Term Care costs and it’s financing options.
Within weeks, another article in Think Advisor dated for November 25, 2017, states “One America Sees LTC Solution Knowledge Gap.” One America says they have new evidence that ignorance continues to be a barrier to use of insurance-based Long-Term Care planning arrangements. Back to the Future (Again!)
November 4, 2010, The New York Times “Ignore Long-Term Care Planning at your Peril”
Long-Term Care insurance ought to be an easy sell to families facing the sandwich challenge. Aging parents, adult children, blah, blah, blah. Then comes the 3rd paragraph: “But something seems dreadfully wrong in the insurance market for Long-Term Care.”
- Medicare Coverage: According to a 2009 Prudential Survey, 37% of people think that Medicare will cover their LTC costs.
- The odds of needing care: The consulting firm Milliman believes the odds of making a claim over the age of 64 is less than 45% and once on claim, the chances that you will continue needing care for more than three years is at least 13.9%. There is a 4.3% chance of it exceeding five years. (Well, according to the Genworth 2014 Long-Term Care Claims Overview, claims history from December 1974 through December 31, 2013, they beg to differ.)
- They can “Self-fund” the Cost.
- Medicaid will take care of it.
- Our children will take care of it.
Does all of this sound familiar?
Then three years later— Forbes: Personal Finance April 29, 2013 : “What We Don’t Know About Long-Term Care… Is A Lot!”
“Americans over 40—in other words, us—are dangerously unaware of our likely need for Long-Term Care when we age and woefully ignorant about the costs according to a new poll of adults in midlife and beyond.”
Who’s Ready to Get Older?
Only 16% of those surveyed said they had done a great deal of planning for their long-term living assistance needs; two-thirds admitted they’d barely started preparing.
Who Will Need Help?
The survey found that even many of us who have been caregiving for our own parents have taken no steps to prepare for the day our children may need to look after us. 53% of the people responding said they had provided care for a family member or close friend, yet only 24% said they thought it was very likely that they’d ever require ongoing living assistance themselves.
And while 77% said they were confident their spouse of partner would help them as they aged, if need be, only 46% said they were sure they could count on their children. Maybe that hesitancy reflects the fact that nearly 60% of respondents had “NOT” talked to loved ones about the possibility. That’s surprising, considering 72% who had been family caregivers say the role was stressful!
Who Can Afford the Get Old?
In the survey, 58% of the people over 40 guessed that living in a cursing home costs less than $5,000 a month—in California, in 2018, that now costs on average of $310 per day or $9,300 per month or $112,000 per year. (Remember, today, the Federal Government estimates that 70% of American adults will require Long-Term Care at some point after age 65, on average for at least three years.)
The Fleecing of The Industry… The Blind Leading the Blind?
Lets begin from the “Top Down”— The Companies!
In 1987, there were about 25 carriers nation wide with about a dozen regionally based. The product was just beginning to transition from “facility/nursing home only coverage” to Nursing Home with limited home “Health” care coverage. The key players on a national scale were Amex Life, CNA, Aetna, American Travelers, Transport Life, Unum, Penn Treaty, Travelers and from the carrier side of agents distribution New York Life and John Hancock.
With the exception of the latter two, all the rest were competing for those thousands of “Idependent Agents.” In my first 6 years with Amex Life, I kicked butt in new business production, everyone wanted to sell Amex Life, an American Express Company. The name, the experience, the “Blue Box!” We weren’t the cheapest, we weren’t a liberal underwriter, and we did’t have the richest benefits. Of the 25-30 companies offering this product in the 80’s, we were it!
However, things began to change in the 90’s, you had an explosion of companies entering the market, by 1994 you had over 150 companies offering some form of LTCI. All competing for a growing number of “Independent Insurance Agents” including Broker Dealers/Investment Reps.
The Fleecing of the LTCI Industry: The Distribution Channels or Groups
Many companies in order to reach their thousands of independent agents, formed relationships with MGA’s, SGA’s, GA’s and Regional and National organizations to reach out to their channels of agents. Some of these groups formed alliances with similar organizations for national exposure but all quickly found out that to be competitive and to capture and or retain these independent relationships they needed more commission, lower rates, more liberal underwriting and richer benefits—“more bells & whistles” they would provide more “Sales Volume!”
And each year, they came back asking for more and guess what, the volume never really came. I mean, thinking about it, including pre and baby boomers populations all this industry has reached is about 6 million, Nationwide over 30 years…Pathetic! I mean think about, 49 million people were born between 1927-1945 (pre baby boomers), the initial Long-Term Care market of the 80’s & 90’s. Then there are 78 million of the baby boomers those between 1965-1983 and another 66 million between 1965-1983, I mean, HELLO!
To top all of this off, as you can see, little to no training or education of agents, let alone consumers, has really been done! All I keep hearing from the companies is that CE training is a “barrier to market” on because of the 16 hour training requirements of California: 8 hours of LTCI and 8 hours “classroom only” for Partnership is a restriction barrier, a burden, etc…REALLY! And year after year the studies, reports, and surveys continue to say “what needs to happen here is that agents, planners, and advisors need more real sales training.”
We here at Senior Insurance Training Services have specialized in this training for over 25 years, nothing else and we can’t get five “butts in seats” to hold a class.
Stay tuned for Part 3 of the Fleecing of the Industry: States, Dept. of Insurance & Agents!