After a big drop in sales in 2004, the year 2005 shaped up to be a transitional one in long term care insurance (LTCI) with more visibility, greater interest in the product and more stability in the market. Because of this, the big question today is what does the future hold for 2006 when it comes to LTCI? Is it feast or famine? If we take out our crystal ball–and look at past performance–we believe there will be a positive focus on the bottom line for all parties involved with LTCI products. And it will happen simply by going back to the basics of good business.
A Focus on the ROI of Good Relations
In the year ahead, carriers are sure to focus on profitability by becoming leaner and more efficient–spotlighting basic sales support as opposed to new product bells and whistles. This will spur a tighter integration between Brokerage General Agencies (BGAs) and carriers of LTCI products. Smart carriers already are aligning themselves more closely to their biggest distributors and offering BGAs stronger partnership commitments. Some of the partnering services we've seen include:
–Dedicated internal and external customer service and sales support;
–Strategic consulting services to improve both business processing and marketing functions;
–Access to advanced sales training resources, such as talented trainers; and referrals from institutional customers so carriers can outsource costs.
On the corporate side, LTCI will continue to expand for several reasons:
1) Carriers have made new programs available to the small and mid-size employer marketplace. These plans were created by taking "big employer" benefits crafted for Fortune 500 companies and re-packaging them for smaller businesses. They comprise the best big company advantages, including electronic enrollment and helpful communication material, while incorporating high/low commission schedules and broker-of-record protection.
2) Health Savings Accounts (HSAs) are becoming more prevalent. As HSA values build, recipients will realize they can pay LTC premiums out of their HSAs. HSA plan growth will be substantial in 2006 as people attempt to control their health care costs. Not only can money in HSAs be used for LTCI premiums, but it also can be used to supplement LTC out-of-pocket costs when care is needed.
In regards to other tax incentives for LTCI, don't look for major above-the-line deductions. However, like the ability to pay for LTCI from HSA accounts, incremental reforms will help, such as expanding the partnership programs beyond the current four states, allowing penalty-free withdraws from qualified plans and other modest incentives.
3) Employees prefer to buy benefits through the employer. As companies recognize this and strive for ways to keep their employees satisfied, they will continue to give the LTCI benefit their seal of approval. This buy-in from employers will be the key factor to success with corporate LTCI. Combine employer support for LTCI with professional advice from an advisor and corporate LTCI sales are sure to rise.
