Published in the March 2011 issue of Brokerworld Magazine by Ronald R. Hagelman Jr., CLTC, CSA, LTCP
As mentioned in earlier columns: There is an elephant in the room that will not go away. Its presence should be crowding out any breathing room remaining to maintain a seemingly impenetrable wall of self-deception. In recent speeches, our Health and Human Services Secretary has concluded her long term care conversation by clearly defining the presence of the massive pachyderm: “In the years to come, nearly every American family will have a grandmother or a father or a sister or a son who needs daily help because of a disability.”
As one of those involved in sales every day, I remain puzzled, perplexed and peeved at the amazingly resilient ability to ignore the size, girth and smell of our extra large peanut-eating friend. It must somehow appear not to be a real elephant. It must miraculously be seen as only the illusion of an elephant.
The only way I can explain the persistent ability to so completely ignore the obvious is that this must be the proverbial pink elephant. An elephant that can appear and disappear based on one’s level of alcohol intake. But don’t be fooled, that pink elephant is on a 24/7 eating binge!
Again quoting the HHS ringmaster: “Approximately 10 million Americans need long term care services and support, ranging from having an aide visit for a few hours a week to living in a nursing home with around the clock care. As Americans age, that number will rise steadily; by 2020, the estimate is that 15 million Americans will need some kind of care…We know that one out of six people who reach the age of 65 will spend more than $100,000 on long term care.”
As if an “ordinary” pink elephant isn’t intimidating enough, consider the catastrophic possibility of confronting an elephant parade. This was recently illuminated in the center ring by Genworth Financial’s claim analysis released last year:
• Longest claim is 17.2 years.
• Largest single claim is $1.1 million.
• Female claimants have received 71 percent of claims dollars.
• Mental disorders, including dementia use 49 percent of all claims dollars.
The risk is real, the elephant exists, and it is rapidly gaining weight. And in the sober light of day we are confident that more insurance is the only viable solution. Although it may be difficult to recognize, even the CLASS Act is supposed to be an insurance program.
No one can deny that consumer awareness of the existence of the elephant remains the key to our success. In July 2005 and again last March, a think tank was co-sponsored by the Society of Actuaries and the Intercompany Long Term Care Insurance Conference. A small group of dedicated and enthusiastic “elephant behavior” experts gathered to consider future directions and priorities. As a participant in both sessions I was impressed and inspired by the moral force of goodwill. We came together with non-denominational intentions to work together to identify a focused path to help create our own elephant graveyard.
At the March 17 think tank session, “LTCI from Hope to Change,” we identified two primary market segments:
• The middle mass, representing 83 percent of households suited for LTC protection with an average income leading up to retirement of $75,000 and average assets of $100,000.
• The middle affluent, representing the remaining 17 percent, with an average of $132,000 in assets (net of home) of $390,000.
The middle mass must have products that are at least perceived to be less costly, simpler and more flexible. This is not just about a cheaper product; more importantly, it should be about revealing the true value proposition of the financial transaction.-+
The middle affluent market will, on the other hand, remain an individual sale for the most part, including partnership and combo sales.
Recent gains in worksite sales need to be expanded for the middle mass market. More product innovations are needed to further reduce cost and expand participation.
The CLASS Act was not yet law at the time of this meeting; however, the general consensus was that the CLASS Act would help to raise consumer awareness.
Concern was expressed by many that the CLASS Act might create a false sense of security. The primary obstacles for improvement were identified as affordability, limited product design, and a diminishing cadre of qualified elephant trainers.
Even though we have had some recent contrition in terms of carrier commitment, it was recognized that we need more company participation and a serious attempt to expand the range of alternatives available to leverage the risk.
Our elephant has been parked squarely in the middle of too many American living rooms for too long. Yet we all know pink elephants are merely hallucinations, so there must be a way to make them disappear!