Although some long term care insurance professionals say the economic slump is slowing their sales, others find their exposure is limited because protection products actually look more appealing when the economy is in trouble.
Marianne Harrison, president of John Hancock Long Term Care Insurance, Boston, says sales “are flat to down a little,” but generally have not been affected much by the sputtering financial system.
“People are steering away from wealth accumulation and toward protection products,” says Harrison, whose company is part of Manulife Financial Corp., Toronto. “When they see their wealth evaporating, products like long term care insurance look very attractive.”
Different sales channels have seen different impacts from the economy, she adds. “More traditional LTC specialists say sales are continuing and are not feeling the impact as much,” Harrison says “But financial planners who sell long term care insurance say sales have been impacted more, because they offer long term care as part of an overall financial plan. The economy is making sales difficult for them.”
As for the financial distress of insurance giants like AIG, so far her company has seen no repercussions from their troubles, she says. Harrison points out John Hancock Life Insurance Company, her company’s parent, is rated ‘AAA’ by rating agencies.
“That’s for a reason—conservative risk management,” she boasts. “You see some carriers dropping out of the long term care market. That’s not going to happen with us.”
David Angstadt, head of career sales for Genworth Financial Inc.’s long term care insurance unit, says his company’s sales so far in 2008 are up 30% year over year.
“One of the things that has played well for us, although it’s not a happy development, is that people have seen their 401(k) plans shrink,” Angstadt says.
Now the individual who once figured he could self-insure for long term care realizes that for perhaps $2,000 a year in premiums, he could eliminate the risk, Angstadt says.
Genworth agents are “going back to call the people who had told us they’d retain the risk themselves, and those people are saying, ‘Come on over to talk,’” he says.
Genworth’s relationship with AARP has helped, he adds. It took over the LTC business of AARP, Washington, in October 2007. So far, around 500 career Genworth agents have been authorized by AARP to sell LTC policies to its members.
Genworth, Arlington, Va., has also been recruiting more independent general agents to market its products, he says.
Some producers report a decline in LTC sales. For instance, in worksites that offer voluntary plans, more employees have postponed buying LTC insurance in this fall’s enrollment period, reports Chuck Eberle, president of American Insurnet Agency in Cincinnati.
Individual sales have been sluggish, too, he says.
“People in the past have looked at the cost of long term care insurance as a percent of their portfolio,” Eberle says. “It was possible to show them that as a percentage of their assets, the cost of long term care insurance was small. Now, however, the problem is that their asset basis has eroded. Looking at that cost-vs.-asset ratio has made a lot of people reluctant to buy.”
But Ronald Brie, a regional vice president of LTC Financial Partners L.L.C., says some highly affluent individuals who once had assumed they did not need the insurance are now thinking again. They are no longer so sure they could pay for any care they might need in the future, he observes.
“After a 40% loss on their investments, how could they not have a plan [for LTC insurance] now?” he asks. “They know Medicare doesn’t pay.”
Jonas Roeser, another LTCFP executive, agrees. “Now they want to shift the risk to a long term care policy,” he says.
Roeser, senior vice president of marketing and operations for LTCFP, says his company’s sales are up 23% so far in 2008 and 35% in the third quarter, year over year.
LTCFP, a nationwide network of around 600 LTC insurance producers headquartered in Kirkland, Wash., completed an agreement in June with the National Teachers Association, Washington, to sell LTC insurance to its members. Under the agreement, LTCFP markets John Hancock policies to NEA members through its local agents.
Roeser also believes the financial crisis that has hit many banks actually benefited his company in an unexpected way.
Many large banks have cut back considerably on direct mail advertising for their credit cards, he explains. For businesses like LTCFP, which use direct mail heavily to generate leads, its sales message has less competition for recipients’ attention, he believes.
“The response to our direct mail is up quite a bit,” Roeser says.
The financial uncertainty surrounding some insurers has sometimes hurt sales, he acknowledges.
The recent announcement by Penn Treaty American Corp., Allentown, Pa., that it has stopped selling LTC insurance has had an impact on impaired-risk sales. Penn Treaty was the only LTC carrier willing to take on business that other carriers would decline, Roeser notes. Now producers don’t have a product to offer impaired-risk clients, he says.
On the other hand, the uncertainty surrounding AIG and other insurers in the past few weeks has yet to cast a shadow over LTC carriers in general, he adds. “Some of our biggest weeks have been the last 4,” Roeser says.
Peter S. Gelbwaks, president of Gelbwaks Insurance Services Inc., Plantation, Fla., says his company’s sales for September are up 40% over last year.
“I’m not sure I have a handle on why,” Gelbwaks says. “I like to think we’re just doing better job overall.”
But he also says it’s not unusual for sales of protection products to older buyers to go up in recessions.
Some younger buyers are worried about losing their positions as employers cut back, and they are showing some reservations about buying, he says. And some of those who have purchased LTC insurance could decide to let their policies lapse, he notes.
“We’re going to work harder than we did for sales and move forward more aggressively,” Gelbwaks says. “We’re not going to back off at this point. People need [LTC] policies even more than before. Their nest eggs need protection.”
Insurers’ financial troubles due to exposure to the credit markets are a concern. But leading companies with LTC products specifically are not in financial trouble, Gelbwaks says.
“I do think people are more and more conscious and concerned about ratings and brand,” he says. “The more solid the company, the less concern they have. The biggest brand companies should see more business coming to them. The MetLifes, John Hancocks and Prudentials of the world will do better.”
As for the depressed economy, “we’re feeling pretty good that we’ll have opportunities,” Gelbwaks says. “The opportunities are broader than the risks for our business. The need for coverage hasn’t gone away. The argument for self-insurance for long term care risks is a lot weaker today.”
Phyllis Shelton, a LTC training specialist, says wholesalers to whom she has spoken are painting a mixed picture of the current market.
“Some say the economy has had no impact, and others say it’s hard to get appointments because people want to wait,” says Shelton, president of LTC Consultants, Nashville, Tenn.
In general, the producers who are going to succeed in the current economy are the ones who are willing to keep at it, she says. Those who have invested heavily in LTC insurance in terms of time and effort “just want to make it work,” she says.