Long-term care (LTC) in the U.S. is in crisis mode, and the “silver tsunami” of baby boomers hitting retirement age is quickly compounding the problem. It’s a crisis on two fronts …
1. A crisis of financing: LTC costs have outpaced inflation since 2003 according to Genworth Financial’s 2012 Cost of Care Survey (April 2012). Yet few people are preparing for their long term care needs, either through insurance or savings. According to the Congressional Research Service, just over 10 percent of Americans aged 55 or older buy long-term care insurance for themselves. That leaves government programs to take up the slack, and they account for 63 percent of LTC funding, with Medicaid paying 40 percent and Medicare paying 23 percent in the form of post-acute care [Source: Henry J. Kaiser Family Foundation, Medicaid and Long-Term Care Services and Supports, March 2011]. Without serious reform, these government programs simply won’t be able to withstand the “tsunami.”
2. A crisis of perception: Many people can’t imagine a time when they’ll need assistance with fundamental activities of daily life such as bathing. A baby boomer has a 70 percent chance of needing LTC at some point, yet most are unaware the probability is that high. And many assume their other insurance or Medicare will take care of them – often failing to understand Medicare’s severe limits, and falsely believing that Medicare covers LTC services. Believing “it’ll never happen to me” – and believing government programs will take care of them if it does – many simply choose to avoid the expense, complexity, and discomfort of buying LTCI.
So who IS buying long-term care insurance?
According to The Current State of the Long-Term Care Insurance Market by LifePlans, Inc., annual sales of individual LTCI policies have been declining since 2002. But there are still plenty of opportunities in the market. For instance:
- Younger, wealthier, and employed individuals are buying policies. In 1990, 42 percent of LTCI buyers were over the age of 70; by 2010, only 8 percent were over 70. Also in 1990, only 21 percent of LTCI buyers had a median income over $50,000; that rose to 77 percent by 2010. And while only 15% of LTCI buyers were employed in 1990, that number reached 69% in 2010.
Why are they buying?
Most policyholders like the flexibility to choose the type and location of their care, and the comfort of knowing they won’t be a burden on family, citing these as major reasons for buying. Many want to maintain their lifestyle and consumption habits, in addition to protecting their assets. Bottom line – there are many good reasons for having LTCI.
How can we better reach out to prospects?
- Simplify the message. According to the American Health Insurance Plans, 49 percent of prospective LTCI customers cite confusing policy terminology and options as a major reason they choose not to buy.
- Explore new channels. Consumers today purchase products differently than they used to and rely more on the Internet.
- Explore new products. Stand-alone LTCI policies have become more comprehensive with greater benefits, and combination products are growing in popularity.
- Explore new partnerships. LTCI carriers have gained a great deal of knowledge and expertise over the years, and they’re ideally situated to explore new product and distribution partnerships with public payers, providers, health plans, etc.
The market needs YOU!
The decade from 2000-2010 saw a mass exodus of companies from the LTCI market, and there are now fewer than 10,000 agents selling the product. So the need for long-term care insurance will only grow with the demand for LTC financing.
The next time you request a quote for another product, why not ask for a long-term care insurance quote too? You might be surprised at how much your clients appreciate any proactive long-term care information you can provide. Need a helpful sales tool? Download this flier, “Five Reasons to Secure Long-Term Care Insurance Now.”