Incubating Long-Term Care Sales: The Drive Toward Simplicity is a Worthy Pursuit for All
by Larry Moore

The name of the game in the long-term care (LTC) insurance industry is simpler plan design. The good news is that carriers are responding to this call as quickly as regulation will allow. A 2006 LIMRA survey asked 90 LTC insurance professionals how LTC insurance needs to change to increase market penetration. They said the policies should do the following:

- 37% be simplified. ¥ 35% be more affordable.

- 16% be left alone.

- 10% be combined with another coverage.

- 2% be enhanced. Agents, particularly those who are new to LTC insurance, must refine their sales techniques.

A surprisingly simple formula for success is to use the needs-based sales approach. Each step allows the seller to educate clients, further building the relationship and delivering value. Finding what's truly important to your clients will be the foundation of selling the value of LTC insurance.

Identifying the consumer's needs should be one of the easier steps in your sales process. By getting prospective clients to talk about their dreams, financial goals, and concerns, you'll develop a laundry list of needs to which youÕll be able to tie product benefits. In a 2006 survey by John Hancock Life Insurance Company, consumers said the best reasons to buy LTC insurance are the following: ¥ 89% not being a burden on my family.

- 76% preserving assets for my spouse. ¥ 66% leaving an inheritance for my children. Selling Value The fundamental value of LTC insurance has not changed Ð to help protect retirement assets. But, it has been enhanced over time, particularly in the areas of home care and support for the policyholder. Communicating the value of the policy is critical so consumers are not left questioning the level of premiums associated with LTC insurance.

One way is to communicate the product side of the equation. My focus on product specifics does not downplay the importance of the emotional side of selling, which is the most challenging to master. It relies on your ability, courage, and instincts to overcome objections. However, over the years, I've observed hundreds of agents who do a poor job of communicating what they're selling. So what are you selling? It's a financial strategy to help cover the costs associated with a chronic disability. Baby Boomers who are dealing with aging parents can especially relate to this. Once you define that basic premise, you can follow a clear strategy to communicate the components of a typical LTC insurance contract that are most important to your client. Consider the following sequence of questions when taking your client or prospect through the critical components of LTC insurance or when evaluating competing contracts:

1. What do I get with LTC insurance? You get a pool of tax-free dollars to help fund your long-term care. Some carriers go beyond the benefit payments to provide advice, discounts to providers nationwide, and resources, such as quality reports on providers.

2. How do I get it? In most cases, your doctor tells the company that you're disabled physically as defined by your inability to perform two of six activities of daily living or you need constant supervision due to a cognitive loss.

3. How much can I buy? You can buy LTC insurance coverage ranging from about $150,000 to $2 million, depending on your needs. You select a daily or monthly payout -- as much as $500 a day or $15,000 a month. Of course, a monthly payout offers more flexibility.

4. How long can I get it? Most agents undersell the value of LTC insurance at this point. The product sounds a lot less powerful when you begin by selling years of coverage versus dollars. Which of the following sounds more substantial? ÒA comprehensive policy will give you $150 a day for five years' or "if you needed this care today, a tax-free funding strategy would give you immediate liquidity on a $270,000 pool of money at a present value rate of $4,500 per month." The overall policy value makes a more enticing story about the leverage and purchasing power of LTC insurance. Once you've positioned it this way, you can get into mechanics. You can mention simply that the selected benefit period is a guideline for how long the policy will last, but, in many cases, the pool of dollars lasts far longer when full utilization doesn't take place in a given month (under a reimbursement style contract).

5. How do I protect myself against inflation? There are ways to ensure that the policy values remain relevant over time based on the client's age and affordability. They include the following: ¥ A 5% or 3% compound that guarantees an annual compounding rate of return for the life of your policy. ¥ A dynamic, compounding inflation option based on the Consumer Price Index or similar index designed to mirror inflation.

- For less premium, a fixed 5% simple option offering equal increases over time, which is typically better for older ages. 6. What other options are critical to my client? For the policy to sound rich in value, avoid rattling off a list of optional features from the brochure. Focus on what your clients say they want. If they don't know, ask lots of questions. Running down a list of all the wonderful features they can add creates complexity and confusion and will only represent more expense in their eyes. You have only one opportunity to communicate the value of LTC insurance to your prospect. You can only achieve maximum success by focusing on needs and highlighting value versus cost. Perhaps refining your strategy around how you communicate your product will lead to a more positive outcome and greater sales.
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Larry Moore is Western director for long-term care insurance sales for John Hancock Life Insurance Company. Moore is a San Francisco Bay Area native and a long-term care insurance industry veteran with nearly 17 years of experience much of it advising clients. Moore earned a B.S. in Finance and Economics and an MBA from the Univ. of San Francisco. He can be reached at (425) 205-2110.