Transcript Document

How to Talk
Positively About
Rate Increases
and
New Benefits
by
Nancy A. Dykeman, CLTC, CSA
Where is Your Pain?
The end of the world is not near.
Where do we go from here?
It’s YOUR choice to deny and
fight with change or to accept it.
What did you think would
happen?
Taking it apart and putting it
back together.
“If you can’t explain it to a six
year old, you don’t understand
it yourself.”
Albert Einstein
Lets go back to the
beginning…
The first policy was sold on December 1, 1974 by
Fireman’s Fund.
1974 Inflation continues to spiral out of control around
the world reaching 11.3% in the USA and 17.2% in the
UK and the global recession deepens.
More and more smaller digital based consumer products
appear in the shops and the earliest forms of Word
Processors appear which resemble a typewriter more
than a computer.
After the findings of the Watergate Scandal Richard
Nixon becomes the first US president forced to resign
from office.
(some of us remember…)
Guess what the premium cost
was for a less than 4 year
plan at $50-$70 per day
benefit with inflation
protection?
Did you think things would remain as they were in 1974?
Pocket calculators start to appear in
shops
The first use of UPC or Universal product
Code BAR CODE UPC scanner installed
in Marshes Supermarket in Troy Ohio
Born This Year 1974
Leonardo DiCaprio
Alanis Morissette
Jimmy Fallon
Victoria Beckham
Oh Boy!
(You Tube Video of “Happy Days”)
http://www.youtube.com/watch?v=pQ-ZDYojnnk
Jonathan Pond, from: AARP
January 4, 2011
“Many of the biggest and most
respected companies that issue
both individual and group LTC
policies have either raised
premiums on existing policies
already or have announced plans to
do so soon.”
Was it just the claims
experiences?
What about carrier revenues not
earning what they used to?
Inflation Rates Graph
(2003-2013)
4.1
%
3.3
%
3.4
%
3.0%
2.5
%
2.7
%
1.9
%
03
Year
Bureau
0.1
%
04
05
06
07
08
1.5
%
09
10
11
US Bureau of Labor Statistics
1.7
%
1.6
%
12
13
Treasury rate information provided by GovPX
2013
Type
When interest rates
are low then reserves
can’t grow. (like they
used to)
Today
1 Month
0.03%
Bill
3 Month
0.07%
Bill
6 Month
0.10%
Bill
2 Year
Note
0.27%
5 Year
Note
0.77%
10 Year
Note
1.85%
30 Year
Bond
3.04%
So Now What?
It Really Isn’t Hard to
Understand!
Before a Premium Rate Increase Letter:
Call your client and explain that there is something new coming
about his policy. An expected increase in the premium amount.
Explain the amount of increase based on your knowledge and
that a letter will be sent to him. Suggest that you tell them the exact
amount of new premium, not just a percentage of increase over
current premium.
Tell your client that the increase was expected due to claims
experience in a class of insureds in which you are included.
Tell your client that the increase was expected because of the
current investment situation the carrier faces with this economy
And that the premiums provide the reserves to pay future claims
and as your agent, I want your claims to be paid without question.
Advise him that you will explain the options given by the
insurance company when the letter is received and you are
confident that the options will provide the right choice about
continuing the coverage.
Example:
Policy purchased in 1993 with a
premium of $78 per month.
In late 2012 the proposed increase
was $70 per month with a new
premium of $148.22.
She was given options to reduce the
inflation protection (her daily benefit
had more than doubled) or reduce
coverage.
What did she do?
Oh, and remember, back
when – these policies were
predicted to have higher
lapse rates and assumptions
were based on mortality, not
living many years with
chronic health problems.
From 1974 to about 2003 we
didn’t experience rate
increases.
Since 2003 some policyholders
have had more than one
increase.
We expect premiums to
continue to increase. The
actuaries tell us so.
NOW WHAT???
Expect these changes soon:
1. Premiums on new long-term care insurance
policies with some carriers, for single
women are slated to increase by 20% to
40% beginning in April. Unisex pricing has
been the norm until now, with men and
women paying the same amount for
identical coverage.
2. There are basically two factors driving
gender-based pricing: (1) Women live longer
and, as such, are more likely to require longterm care, and (2) The length of care for
women is generally longer than it is for men
By Robert Klein for RetireMentors,
CHOICES for your prospective clients:
There also is an increasingly popular
breed of "hybrid" policy that some
financial advisers are recommending.
These policies pair long-term-care
benefits with an annuity or life insurance.
Thanks to tax-law changes that took
effect in 2010, policyholders are
permitted to take tax-free withdrawals
from these policies to cover long-term
care.
Because customers can pay for this
coverage with one upfront premium, they
can effectively lock in a price for the
benefits.
And with the Pension Protection
Act 2006, they can use money
they already have in qualified
and non-qualified funds to pay
for the policy, tax-free and the
benefits are tax-free:.
Linked Benefit Annuity Products:
Benefits received for covered long term care expenses are tax-free
and internal LTC rider charges are not taxed as distributions.
Linked Benefit Life Insurance Products:
Internal LTC rider charges are not taxed as distributions.
Traditional Long Term Care Insurance (LTCI)
New 1035 exchange rules provide tax free options to fund a
traditional LTCI policy.
Are you changing your approach,
too?
Can you accept the facts and
explain the reasons?
Are you willing to adjust?
Is it long-term care insurance products
and what they do?
Or is it planning for extended care?
Is it premiums, benefits and features?
Or how extended care is tearing
families apart because of the physical,
emotional and financial burdens?
Is it paying for care using assets?
Or is it paying for care using
income which changes lifestyle?
We should expect a BOOM in longterm care insurance sales and
planning ahead by consumers.
When people believe that extended
care blows families apart, they will
invest money from their income
today and during retirement to
protect their families.
New delivery of care
New benefits
New ideas
Before early 1990s-County Homes
and Nursing Homes
1990-2000-Homecare recognized
and Assisted Living was created
Today-Care at Home comes First
Article by Thomas Day
About 73% of all long term
care is provided in the home
environment typically by
caregivers who receive no
compensation for their labor.
Another home care
arrangement is for family
members, who are not living
close by or who are employed
fulltime, to become supervisors
and coordinators of care and to
offer only limited, personal,
hands-on care. These people
may hire a care manager to act
on their behalf.
In large urban areas where families
have lived together in an apartment
complex and grown old together,
there is a possibility for residents in
the complex to band together and
watch out for each other. This might
also include limited caregiving
services for neighbors.
Assisted Living coverage can now
include payment for care as well as
some of the rent in the apartment.
Also, some of the homemaker
chores of the facility staff can help
to get policyholders on claim faster.
Are you still selling lifetime benefits?
Today with average claim of 36
months, or 4-5 years at home, the
need for a lifetime of care isn’t as
popular.
Cost of lifetime benefits is higher
now.
5% compound inflation protection
was affordable even when it
doubled the premium.
What about FPO?
How about building benefits over
time?
What about no inflation and higher
daily benefits?
Without a plan for care everything
changes and the outcomes aren’t
always positive.
With a plan for care, yes, everything
changes but the outcomes can be
much more acceptable.
What If…insurance doesn’t cover all
of the care costs?
What If…we stay at home longer at
a lower cost in order to stay more
independent?
What If…a prospective client can’t
get through underwriting?
Gender-based
Pre-ex
What If…you learn more about
combo products and offer them
easily?
“Just keep telling yourself this is only temporary.”
Anonymous
“The reason you were born is because all of your
ancestors for thousands of years believed that
something better was possible.”
SalientAlien
“A pessimist sees the difficulty in every opportunity;
an optimist sees the opportunity in every difficulty.”
Winston Churchill