2015 Long-Term Care Study.
Seven out of 10 consumers over the age of 65 will need long-term care at some point in their lifetime, according to the Centers for Medicare & Medicaid Services. Given the rapid advancements in medical technology, increased life expectancies and the rising cost of health care, long-term care planning is an immensely important social issue that affects not only the nearly 80 million baby boomers either in or planning for retirement, but also their families and loved ones.
Long-term care planning is also a very complex issue. To assist their clients with the LTC planning process, advisors often have to navigate family dynamics, contend with inter-familial tensions, sort through a proliferation of available product solutions, work with potentially negative consumer perceptions and determine how a long-term care plan will support an overall retirement plan, which in itself can be a convoluted issue.
It is essential, however, that advisors confront these issues. The expenses associated with long-term care can wreak havoc on even the best laid retirement plans, and a well-thought-out long-term care plan will ensure clients' security and dignity at a time when they need it most.
To better understand how advisors are engaging in long-term care planning on behalf of their clients, National Underwriter and Investment Advisor research teams recently conducted a comprehensive exploration of the topic. Genworth sponsored the research study. The purpose of the undertaking was to understand the importance advisors place on long-term care planning with their clients, the solutions they are using, areas where they are challenged as well as areas of perceived opportunity, and much more. The findings have been illuminating and confirm that long-term care is a very prominent issue among advisors and their clients.
For the purposes of the study, unless otherwise specified, any reference to "LTC" or "LTC products" refers to the whole gamut of products that offer LTC-related benefits, including life insurance and annuity combination products (also commonly known as linked benefit products), life and annuity products with LTC, chronic illness and critical illness riders, group and worksite LTC products, and chronic and critical illness insurance, as well as traditional stand-alone long-term care insurance.
Contrary to the notion that LTC planning is a niche practice area, most advisors are actively engaged in some form of long-term care planning, albeit through a broad variety of approaches. In fact, nine out of every 10 financial professionals we surveyed sell products that include some type of long-term care benefit. The advisors we surveyed are quite optimistic about the opportunity presented by LTC product sales, though, overwhelmingly, they admit a desire for additional training and education in this area.
Given the demographic shift currently taking place in this country and the expected increase in consumer demand for long-term care planning solutions, the industry is facing a very substantial opportunity if it is able to understand the current state of LTC planning and find a way to educate advisors about the range of solutions available to them. The industry must also educate advisors about how to apply those solutions to specific client circumstances and meet advisors' needs in the areas of product development, underwriting and various support services.
Who Sells Long-Term Care?
Advisors selling products with LTC benefits have been doing so for an average of 7.43 years, though half have been selling LTC products for a decade or more. Advisors in higher income brackets have been selling LTC products for a longer period of time, which makes sense given the conventional wisdom that more successful advisors are less transactional and more geared toward planning, as well as serving an affluent clientele that demands more holistic planning.
For advisors active in this market, LTC product sales provide a meaningful revenue stream, accounting for an average of 17% of their total income. The share of income coming from LTC tends to be higher for insurance-oriented advisors when compared with their investment-oriented counterparts (20% versus 13%, respectively), though both groups on average have been active in the market for roughly the same amount of time. Insurance-oriented advisors earn an average of $30,618 in income from LTC product sales compared with $22,028 for investment-oriented advisors.
An interesting way to gauge the vitality of the LTC market is to measure advisor sales experience as well as advisors' optimism about product sales in the coming year. About a quarter of advisors actively selling LTC products report an increase in sales in the past 12 months, with 6% reporting a substantial increase. More than half--56%--report flat year-over-year sales, and 18% report a decline.
Advisors who have sold at least one linked benefit (i.e., "combo") product and those who have sold chronic illness insurance were more likely to report an increase in sales over the past year.
When asked about sales expectations for the coming year, advisors are quite optimistic, with 42% anticipating "somewhat" of an increase and 13% expecting a substantial increase. Thirty-nine percent are expecting flat sales, and only 6% expect a decline (Figure 1).
Interestingly, the deeper the advisors' activity level in the LTC market, the more optimistic they tend to be, which suggests advisors do not perceive that they are close to exhausting the market opportunity presented by selling LTC products. Those who have sold linked benefit products in the past year also tend to be a more optimistic group.
"Sold, Not Bought"
The old truism that insurance products are sold, not bought, is certainly true when it comes to LTC-related product sales. Despite recent reports that boomers are increasingly concerned about paying for health care in retirement, advisors say they are the ones initiating the conversation around LTC planning. Survey respondents report that they themselves, rather than their clients, initiate approximately 75% of the conversations around LTC planning.
When it comes to chief selling points, advisors ranked "peace of mind" as the most important benefit to emphasize when making a sales presentation, followed very closely by "protecting retirement savings." Other important sales points, ranked in order of importance by advisors, include: obtaining quality care, weighing benefits versus cost of premiums and the ability to choose care options (Figure 2).
The most common objection advisors run into with their clients when proposing a long-term care product is affordability, cited by two out of every three advisors as an objection they "at least sometimes" encounter. Another common objection is that clients do not want to pay for something they may not need, a consumer concern that could help spur sales growth among linked benefit products for which the annuity account or the life insurance death benefit remain intact if the long-term care benefit is not exercised. Concern over rate increases is the next most common objection advisors encounter, though despite all of the media coverage about LTC rate increases, only about half of advisors report "at least sometimes" encountering this concern among their clients and prospects (Figure 3).
Despite the fact that clients are concerned about the affordability of long-term care coverage, only about one-quarter of advisors classify "low premium" as an extremely important factor when making a product recommendation. Company reputation is the most important factor for advisors during the product selection process, followed by a strong company claims history. The fact that these two factors were not mentioned as common client objections suggests that advisors are proactively and appropriately performing their due diligence on behalf of their clients when recommending an appropriate product (Figure 4).
Who's Not Selling LTC?
Only 10% of survey respondents do not sell products that offer some type of long-term care benefit, including traditional long-term care insurance, linked benefit products, life and annuity products with riders, group and worksite products, and chronic or critical illness insurance. Of the respondents not selling LTC-related products, slightly less than 20% state that they are "at least somewhat likely" to enter this market within the next year. The majority are either neutral or unlikely (Figure 5).
When non-sellers are asked why they have not sold a product that offers LTC benefits, the chief reason given is a lack of sufficient understanding necessary to sell these products, cited by 35% of those respondents. Concerns about the cost (30%) and rate increases (23%) were common reasons as well, but may also relate to a lack of education about the available array of product solutions to address clients' long-term care planning needs, such as combo products and riders that offer more affordable entry points without the potential for the rate increases that have plagued the traditional LTCI market. Only 10% of respondents not selling LTC-related products cite "I do not see the value in long-term care related products" as a reason for not selling them, suggesting the need for long-term care planning--and the opportunities it entails--is largely a foregone conclusion among advisors (Figure 6).
It is also noteworthy that non-LTC sellers report that, on average, only 8% of their clients have asked about long-term care planning in the past two to three years. Although active LTC sellers report that they are more likely than their clients to initiate conversations about LTC planning, advisors actively selling LTC still say that about 25% of conversations about long-term care planning are initiated by clients, which is significantly higher than what non-sellers are seeing.
What Advisors Want
Although lack of understanding is the top reason given by non-LTC sellers for why they don't sell related products, the majority of all advisors--71%--want more training. This is true regardless of income level or, interestingly, LTC sales expertise. For example, advisors for whom LTC-related product sales account for more than 30% of income are just as likely to desire additional training as advisors for whom LTC sales make up less than 10% of total income.
Nearly two out of three respondents (63%) want training in how specific products work, which makes sense given the relatively low marks advisors gave themselves when it comes to product knowledge and the wide variety of solutions available. For advisors who actively sell LTC-related products, only 75% say they are at least somewhat knowledgeable about traditional LTCI (though the percentage is significantly higher for those who have sold a traditional LTCI policy within the past year). Only 55% of active LTC sellers assess themselves as at least somewhat knowledgeable about life-LTC combination policies, suggesting this is an area of opportunity for the industry if it can find an effective way to educate advisors about the combination product line.
When we asked respondents in what areas they'd like additional training, the most commonly cited area was sales strategies. Product knowledge followed and, after that, 60% want training in how to convince prospects of the need for LTC-related products. The majority also want training in how Medicare and Medicaid work with LTC products, as well as how to determine which products are appropriate for specific client circumstances (Figure 7).
Despite the self-professed need for additional training, fewer than one-third of respondents say that sales and product training from insurers will help them sell LTC-related products more effectively. The No. 1 form of support advisors want from insurance companies is more affordable products, cited by 47% of respondents. And advisors actively selling LTC products are more likely than non-sellers to desire affordable products (49% versus 28%, respectively). Thirty-nine percent of respondents desire products that are easier to understand and explain (Figure 8).
Are Female Advisors Better at Selling LTC?
One of the most interesting things to emerge from the findings of this survey is the disparate experience between male and female advisors when it comes to the sale of LTC-related products. Fourteen percent of the qualified respondents were female, and both genders are equally as likely to be actively selling LTC products. Although both male and female advisors have just about the same level of experience in the market in terms of years (7.46 and 7.27 years, respectively), LTC sales account for a significantly larger percentage of total income for female advisors--25% versus 16% for their male counterparts. Female advisors were also slightly more likely to report more sales over the past 12 months. The following are some additional distinctions related to the LTC sales experiences between male and female advisors.
When it comes to chief selling points, female advisors place greater emphasis than their male counterparts on:
* Peace of mind
* Obtaining quality care
* Ability to choose care options
* Benefits versus cost of premium
* Reputable insurer claims history
Female advisors also place greater emphasis on the following when making product recommendations:
* Company reputation and financial strength
* Strong company claims history
* Inflation protection
* Tax implications
Male advisors, on the other hand, are more likely to report having to contend with the following client objections:
* Client preference to self-insure
* Won't be approved due to poor health
* Product is overly complicated
* Underwriting process is too long or laborious
5 Habits of Top LTC Producers
Advisors for whom LTC-related product sales account for more than 30% of their total income were more than twice as likely to report a substantial increase in sales over the past year. They are also significantly more optimistic about their sales prospects for the coming year. Although these advisors haven't necessarily been selling LTC products longer than their peers, there were some distinct differences that emerged in the findings that suggest the most successful sellers have a somewhat different approach:
It's about retirement planning. Top sellers are more likely to emphasize the need to protect one's retirement savings when selling products that offer some form of LTC protection.
Know your products. Top sellers have more product knowledge in every product category.
Better educators. Top sellers' product knowledge pays dividends during the sales process, as they are less likely to report contending with client objections that products are too complicated to understand.
Hungry for more training. Despite the increased knowledge level of top sellers, they are just as likely to report the desire for additional training and education in this complex market.
Close--and keep--the sale. When it comes to making product recommendations, top sellers are more likely to factor in the insurers' underwriting flexibility, which suggests they are likely to have higher placement rates and more satisfied clients.