Letter To The Editor:
LTC Insurance Still A Niche Product

David B. Berg writes: The March 2007 Feature article in LTC e-Wire presented the LTC dilemma quite well. (See LTC insurers face biggest issue: consumer apathy.) Although we all see the need for LTC insurance, the fact remains that LTC coverage is affordable by 20%, owned by 7%-8% and we are still waiting for the remaining 12% of the U.S. market that can afford protection. 

Apathy is a real issue, but that changes dramatically the moment a parent needs care and family members realize that assets are at stake. As we used to say, planning on Medicaid is not planning at all. 

The fact is that LTC is not the panacea for other issues. It is a complex product that requires substantial time and training. This is as it should be for experienced agents who are committed to the market.

My firm focuses primarily on the worksite and executive market. We are not surprised that these markets were not the solution in the past few years. The reason why is quite clear: LTC remains a niche product. Here is why:

1. It is still a complicated product that requires a needs-based/conceptual sale. This conflicts with many public perceptions and experiences in purchasing insurance.

2. Despite some of the newer products that try to simplify plan design, many prospects are still confused by options and procrastinate until coverage is not affordable. This seems to be particularly true for those in the 61-70 age group right now.

3. Prices continue to escalate, except with some of the voluntary worksite products, where plan design is often group purchasing organization-based and not the same as for individual LTC sales.

4. We receive a lot of requests for replacement by those in the 61-70 age group, who are surprised that costs are not decreasing and who have coverage that is not comprehensive. They often decide not to supplement their coverage.

5. The industry’s recent experience with the group/worksite market penetration truly demonstrates the niche status.

6. We sell primarily to the worksite and business owner markets, and although interest may be 20%-25% on a voluntary-benefit basis, actual sales stay within the 4%-10% range.

7. Sales on worksite generally involve managers, executives, or those with a LTC experience. Generally, the higher participation rates are higher with worksites that have a higher compensation (affordability) and education level (professional firms). But they still hit that 20% barrier.  

8. If the employer pays, participation rates increase substantially (we have seen as high as 67%), but will these contracts remain in force upon termination?

Basically, the worksite experience—which was supposed to be the panacea for declining individual LTC insurance sales—shows that LTC is still a niche.

David B.Berg, MBA
Director, Benefit Services
SPC International Inc.
Lake Oswego, Ore.
david.berg@spcbenefitadvisor.com.