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Unlocking the Senior Market.

Understanding the financial, health, emotional and lifestyle concerns of older Americans is key to long-term-care sales.

The number of people categorized under the umbrella of being in late adulthood, or as "senior marketplace," is exploding. The aging of America is creating new opportunities and challenges for the financial-services industry. It is not all that often that an industry is in the right place at the right time with the right products and solutions. But, financial-services professionals just may find themselves in that position when helping maturing customers and clients.

A lifetime of personal experiences and historical participation has created a complex human recipe of perceptions among older consumers. This creates one of the biggest challenges to understanding and connecting with seniors. Many financial-services professionals find them to be a frustrating assembly to sell. Financial-services professionals need to spend more time in achieving a broader understanding of the financial and emotional mindset of seniors and the impact of the aging process on financial decision making. That knowledge is the key to unlocking this market.

In 1999, AARP surveyed about 2,000 seniors and asked them if they were looking forward to reaching their 100th birthday. Of the 63% that stated they did not want to reach the century mark, the two principal reasons given for this response were worry about declining health causing a likely need for long-term care and fear of not having enough money and income should they live that long. Financial advisers must adopt strategies that take longevity into account and be able to communicate how those solutions address the clients' fears and concerns.

A Hard Sell

Traditional long-term-care insurance; alternative "deposit" based long-term-care solutions--such as life insurance/long-term-care blended contracts, immediate variable annuities, catastrophic illness/care insurance and annuities with long-term-care benefits and riders--are much needed. But as interesting and sophisticated as these new or updated products strategies might be, they are very difficult to sell. They will be enthusiastically welcomed only if we first connect the problems and solutions they address to the financial mindset of late adulthood, and the real-world emotional, sociological and philosophical issues, fears, and concerns our seniors are facing.

For example, about 93% of the targeted market for long-term-care insurance are self-insuring. In less politically correct terms, late-adulthood America is doing nothing. Sales of the single-pay life insurance alternative are either flat or disappointing in terms of premium objectives. The smartly designed immediate variable annuity has not yet captured the interest of the broker to the extent that it should, even though it would appear to be exactly what many seniors are looking for.

So, if the products are so terrific, why are sales disappointing? There are myriad contributing reasons:

* the concepts are often confusing ("hybrid" this and "blending" that) to the producer, and, as a result, they are difficult to explain to the consumer;

* there are too many other products fighting for shelf space and the agent's attention;

* the seasoned agent is successful and busy doing other things that are already working, and the agent may be reluctant to get involved in new areas and concepts; and

* industry training continues to focus on the product itself--how it works, how to explain it and the 30-page proposal that illustrates it--all of which leaves out an explanation of why the client needs it.

Simply put, insurance professionals have lost sight of the basic rule of marketing: First understand the client, then focus on the products.

To start the understanding process, begin by determining why late adulthood brings a different mindset than middle-aged America. It is because time has no end for the young, but it takes on a new perspective as people get older, and time starts to become definable. As a result, older Americans' core reasoning changes. And even though they anticipate living longer, there is still an end point to consider. This is of particular interest to the financial-services industry, because most of the products and solutions put forth will be perceived as protection against the financial consequences associated with living too long.

Four Primary Concerns

Next, identify the primary areas of concern for people in late adulthood. The concerns fall into four categories: financial, health, emotional and lifestyle.

The financial issue--including rates of return, interest yield, taxes, inflation and appreciation--will always maintain positions of importance. But as people get older, the dominant financial issue is the fear that at some point in the future they may run out of money and/or income. Seniors often are happy with their current financial position and achievements. It is the question--"Where will I be financially 10, 20 or 30 years from now?"--that troubles them most. And it is that fear that causes almost two-thirds of people over age 65 to want to sidestep their 100th birthday. It may not seem rational to younger people, but regardless of their current "comfortable" circumstances, it is very real to older Americans.

The health issue centers on their desire to avoid the financial and emotional exposure related to an extended long-term-care need. This concern interfaces with the financial issue because of their perception that the expense and financial consequences associated with drawn-out long-term care are the major events that will cause them to eventually run out of funds. Therefore, creating additional money to either fund the long-term-care exposure, or to fund the premiums necessary to purchase sufficient long-term-care insurance, is of grave importance.

The emotional and psychological concerns also bear a significant relationship to the financial mindset of prospective clients, and understanding them is crucial to an agent's success. Comprehending the dollars-and-sense reasons for purchasing any product, without connecting them to the emotional and sociological reasons, will leave agents in a vacuum of frustration. Simply put, there are currencies other than money The late adulthood client has three principal emotional/psychological concerns. The first concern is to maintain independence and not become a burden to family and friends. The second goal is to maintain a sense of control. And third is to leave a legacy. Clearly these issues revolve around having enough money in the future, no matter how long that future may last.

Decision Time

Seniors often make buying decisions based upon how the actions they take and choices they make will resolve these emotional and social issues. The implication that there are distinctions between choices based on economics and choices made for sociological reasons is engaging. Middle-aged people almost always act to maximize profit and reward. They invariably make choices that provide the highest ratio of benefits to cost. But as people age, they encounter currencies other than money. More than ever, their motivations are entwined with social relationships, social expectations and responsibilities and the preservation of self-worth. As a result, seniors often behave in a manner that emphasizes social and emotional rewards, thereby relegating the maximizing of material benefits to a secondary position.

Understanding this particular concept will allow an agent to circumvent the frustration that often is encountered with older Americans during a product presentation, when the client procrastinates and avoids taking action, It is a mistake to conclude that the client "just didn't get it." If the connection is made, the client will follow the agent's counsel and purchase the products, because the connection process responds to those emotional, sociological and psychological issues that they are concerned about--namely, autonomy, control, self-worth and peace of mind.

Successful Communication

Consider the following suggestions when addressing the financial needs of a senior client:

* It is not enough to compare the financial benefits of a product or strategy to other financial vehicles.

Connect the benefits received from the product to a need, desire or feeling that the clients have about their issues. Clients must be able to understand exactly why the additional dollar benefits of taking action are important and what those benefits will do for them and their loved ones. The agent must help them do that.

* Customers do not appreciate being told what they think and what they need. Wherever possible, let them lead you to where you want them to go, by asking interesting open-ended questions. For example: "Sam, you've been successful and appear to be enjoying retirement. What do you see happening down the road that might interrupt that happiness?" It's a simple question and there is no right or wrong answer. The client's response will tie into money, income and health...and the depletion thereof. If the response is about becoming ill (long-term care), then it is really about not having enough income to pay for it. There will always be a fear or concern expressed that relates to income and asset protection.

* While it is imperative that an agent distinguish the features, benefits and advantages of the product or strategy being proposed, it is equally important that the agent demonstrate knowledge of the senior mindset, understanding of the impact of aging on financial choices and commitment to continuing senior issues education.

* Be current and read extensively about late adulthood issues and, where appropriate, make the information available to clients.

* Be able to formulate features, benefits and concepts verbally during a sales presentation before getting to the actual illustration proposal. As the clients age, they tend to become less analytical. In other words, don't rely on the proposal as a crutch.

* Simplify the words you use with seniors and avoid industry jargon and buzzwords. Asset allocation, repositioning and annuitization, for example, may not have the same meaning for the client that they have for you. Suggesting a paradigm shift to a 75-year-old may not be effective communication. On the other hand, words like safety, guarantees, control (theirs), choice, flexibility, family, trust and stability are magical.

* Consider hosting seminars and discussion groups, and always remember that the issues of control, independence, legacy, retirement lifestyle and sufficient cash flow resonate with the audience.

Educate the Agents

Increasing the effectiveness of the distribution system and clients' favorable perception of the financial-services industry can be accomplished by training and educating the broker and planner on how a product works, how it is better than its competition and how to sell it. At the same time, it is important to teach salespeople to study and understand the nature and the very different mindset of the senior prospect. Clients will choose the agent and the product that inspires them--or the product that inspires the agent. Agents and brokers are no different. They will choose the independent marketing organization, the "wholesaler" and the company that inspire them.

There is an exploding silver boomer target market, a clearly defined financial and emotional need on the part of the customer, and terrific leading-edge products. To make it all come together, remember the marketing mantra: First and foremost, understand the clients. Find out who they are. Find out what they want. Then tell them you understand what they need.

To accomplish that, the industry must gain a greater knowledge of the late adulthood marketplace. More than just an obligation to develop products, they have a responsibility to educate. This is an analytical and product-driven business, but it is imperative that the companies embrace value-added education programs that expose their distribution system to subjects such as financial gerontology and risk management. By doing so, everybody wins--especially the consumer.

Victor A. Puleo Jr. is assistant professor Risk Management-Insurance & Finance, Department of Economics and Finance, School of Business and Economics, College of Charleston, Charleston, S.C. Richard S. Drazien is president and founder of Senior Risk Management Inc., Jacksonville, Fla.
COPYRIGHT 2001 A.M. Best Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2001, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:target marketing long-term care insurance
Comment:Unlocking the Senior Market.(target marketing long-term care insurance)
Author:Drazien, Richard S.
Publication:Best's Review
Article Type:Brief Article
Geographic Code:1USA
Date:Mar 1, 2001
Previous Article:Long-Term Scare.
Next Article:Focus on the Future.

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