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They Say It’s Broke,So Let’s Fix It!
Session 43: February 28, 2006 Session Producer:
Kirk Shearburn, Vice-President & Chief Compliance Officer
LifeCare Assurance Company
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PANEL• Beth Ludden, FLMI, LTCP, Product
Leader, Genworth Financial Long Term Care Division
• John Greene, Senior Director – Federal Affairs, National Association of Health Underwriters
• Amy Pahl, FSA, MAAA, Consulting Actuary, Milliman – Minneapolis
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2005• Discussion of LTCI needed to determine “whether or not it is viable and should even
be sold” - WI Ins. Comm. Jorge Gomez
• “The overarching issue is whether the product is suitable for anybody.”
“Private LTCI is an important tool that has not lived up to it’s potential.”
- FL Ins. Comm. Kevin McCarty
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FLORIDA HEARING• “Skyrocketing” rate increases
• Contract ambiguity
• Post – Claim underwriting
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Back To the Future• Product Development History
– Why?• An answer to the holes left by Medicare for
chronic services – Mid 60’s• Results: Very profitable and sellable product
– Then?• Companies confidently expanded benefits to
HHC & everything else – Mid 80’s – Early 90’s
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Back To the Future
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What Happened?
You Can’t But Thanks for Playing
•Why? HIPAA
• Route to Unintended Consequence– Name a snappy product development
feature since 1996
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HIPAA• But it’s a good Thing
– Tax clarification– Definitive benefit
triggers
• But it’s also bad– Insurers feel like only
TQ is good– TQ restricts benefits
to chronically ill definitions
– Many agents to this day do not like not having medical necessity
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But That’s Not All
NAIC LTC Model
Regulation
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LTC Model Regulation
• Good Stuff– Adds to the
credibility & viability of the product
– Important to regulators
– Aim is make product development easier
• Bad Stuff– Uneven adoption
adds to filing process– More forms– Stifles creativity– Hasn’t solved the
image issue
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Potential Solutions• Make HIPAA our friend
• Celebrate the consistency & clarity that it really brings to the contract itself
• Industry Activism• Its important that we not take adverse
accusations on the chin• Tell the true story of the power of our product
• Look at the Opportunity – Not at the Competition
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Agent Attitudes• While HIPAA has a framework for
product design that largely creates all products alike, there are numerous nuances. Agents/brokers can only know the details of a few at a time. It is a time consuming product to know and difficult to price and compare across plans. Some issues that were identified are:
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Agent Attitudes• Prices keep going up • “Leap frog" • Adequate reserves and will prices hold long
term? • Group sales - guaranteed pricing? prices
going up • Preference for indemnity or inflation
protection to help hold the value of the product into the future.
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Used by permission: Jeremy Pincus, Principal, Forbes Consulting Group
November 2005
Segmentation ofConsumer Attitudes and Behaviors
toward LTC Insurance:Product Findings
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– 2,732 respondents recruited from the TNS/NFO Worldwide Interactive Panel of 3.6 million individuals completed the LTC questionnaire
– This large sample supported the need to conduct detailed analysis of sub-samples (i.e., 12 segments)
Target MarketTarget Market
Consumer Survey Sample
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Product Truth #1: Hospice care is the highest rated benefit across all segments and ages, followed closely by
home care(A)
Family-Centric
(B)Independence
Driven
Hospice care for the terminally ill
Skilled in-home care from a licensed agency professional
Skilled care provided in a nursing home or Alzheimer’s facility
Skilled care provided in an assisted living facility
Skilled nursing care provided in adult day care
Informal in-home care by an outside friend or family member
“How important is coverage for each of the following types of care?
(Top-2 “important”)
43%
73%
83%
86%
89%
95%
42%
56%
79%
84%
87%
87%
39%
53%
68%
72%
72%
84%
(C)Head in the
Sand
22%
30%
36%
39%
33%
42%
(D)Live for
Now
Source: Q42Base: Age 40-49 (n=1,133); Family-centric (n=264), Independence driven (n=302), Head in the sand (n=283), Live for Now (n=284)
= Indicate figure is significantly greater than comparison group at 95% confidenceABCD
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34%
44%
51%
58%
52%
46%
Product Truth #2: Informal care and adult day care are the lowest rated benefits across all segments and ages
“How important is coverage for each of the following types of care?
(Top-2 “important”)
33%
65%
83%
83%
85%
85%
37%
68%
81%
88%
82%
90%
38%
50%
73%
84%
70%
78%Skilled in-home care from a licensed agency professional
Skilled care provided in an assisted living facility
Hospice care for the terminally ill
Skilled care provided in a nursing home or Alzheimer’s facility
Skilled nursing care provided in adult day care
Informal in-home care by an outside friend or family member
(A)Confident Couples
(B)Self-Directed
Singles
(C)Passive
Burdened
(D)Fading Denial
Source: Q42Base: Age 50-59 (n=827); Confident Couples (n=239), Self-Directed Singles (n=184), Passive Burdened (n=210), Fading Denial (n=194)
= Indicate figure is significantly greater than comparison group at 95% confidenceABCD
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Product Truth #3: Nursing home coverage is a mandatory feature, but only as a “necessary evil” with no marketing
appeal“How important is coverage for each
of the following types of care?
(Top-2 “important”)
35%
57%
83%
89%
89%
90%
40%
72%
86%
87%
90%
88%
37%
47%
67%
70%
73%
79%
24%
36%
47%
52%
49%
61%Hospice care for the terminally ill
Skilled in-home care from a licensed agency pro
Skilled care provided in a nursing home or Alzheimer’s
facility
Skilled care provided in an assisted living facility
Skilled nursing care provided in adult day care
Informal in-home care by an outside friend or family member
(A)Comfortable
Realists
(B)Diligent
Preservers
(C)Fear for Family
(D)Value-Seeking
Rejectors
Source: Q42Base: Age 60-74 (n=778); Comfortable Realists (n=210), Diligent Preservers (n=206), Fear for Family (n=203), Value-Seeking Rejectors (n=159)
= Indicate figure is significantly greater than comparison group at 95% confidenceABCD
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Product Truth #4: Shared family coverage is most appealing at younger ages, and only among
family-centric segments
(A)Family-Centric
(B)Independence
Driven
Unlimited benefit period that ensures no end to benefits
Automatic benefit increases that keep up with inflation
Coverage for up to 4 family members
A high daily benefit to keep you at home as long as possible
A short waiting period providing quicker access to benefits
A high daily benefit to pay for the finest home or Alzheimer’s facility
Benefits paid out as upfront payments, not reimbursed
“How willing would you be to pay extra for each of the following?”
(Top-2 “willing”)
56%
56%
57%
59%
70%
70%
75%
69%
56%
45%
68%
17%
74%
84%
56%
47%
58%
56%
52%
59%
69%
(C)Head in
the Sand
32%
34%
33%
32%
30%
35%
35%
(D)Live for
Now
Source: Q43
Base: Age 40-49 (n=1,133); Family-centric (n=264), Independence driven (n=302), Head in the sand (n=283), Live for Now (n=284)
= Indicate figure is significantly greater than comparison group at 95% confidenceABCD
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44%
60%
71%
53%
64%
64%
76%
Product Truth #5: Unlimited benefits are highly desirable across virtually all segments
and age groups“How willing would you be to pay extra for each of the following?”
(Top-2 “willing”)
40%
41%
51%
53%
64%
71%
72%
3%
51%
61%
65%
76%
79%
83%
34%
36%
34%
39%
41%
35%
32%
Unlimited benefit period that ensures no end to benefits
Automatic benefit increases that keep up with inflation
A high daily benefit to keep you at home as long as possible
A high daily benefit to pay for the finest home or facility
Benefits paid out as upfront payments, not reimbursed
A short waiting period providing quicker access to benefits
Coverage for up to 4 family members
(A)Confident Couples
(B)Self-Directed
Singles
(C)Passive
Burdened
(D)Fading Denial
Source: Q43Base: Age 50-59 (n=827); Confident Couples (n=239), Self-Directed Singles (n=184), Passive Burdened (n=210), Fading Denial (n=194)
= Indicate figure is significantly greater than comparison group at 95% confidenceABCD
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Conclusion
• No surprise, people are willing to consume as high a level of service as they can get
• Informal care and adult day care are not valued as an insurance benefit
• Nursing home care has little marketing appeal• Notion of a shared family plan has appeal,
particularly among younger ages and family- centric groups.
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• Underwriting Practices– Cognitive screening– Uninsurable conditions– Exceptions
What’s Wrong?
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What’s Right?
• Underwriting Practices– Medical histories– Quick reaction to experience
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What’s Wrong?
• Pricing– Persistency– Interest rate– Cost of inflation protection– Rate subsidization
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What’s Right?
• Pricing– Morbidity??
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What’s Wrong?
• Design– HIPAA limitations– Too many options?
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What’s Right?
• Design– Comprehensiveness– Group packaging
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What’s Wrong?
• Claims– ALF– Lack of enforcement– Lack of rigor
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What’s Right?
• Claims– Consumer-friendly
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What’s Wrong?
• Marketing and Distribution– Previous focus on 65+ market– Narrow sales capability
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What’s Right?
• Marketing & Distribution– Needs-based approach– Focus on agent and consumer education
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Is Simple Better?
• Cash Benefit
• Base Benefit with fewer options
• Entirely new chassis– Features from other products– Trigger change
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Trade-off:Simple vs Complex
• Simple – more flexible
• Simple – higher cost
• Complex – match of benefit and cost
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Pie-in-the-Sky Product
• Buyer Needs– Affordability– Non-forfeiture Value– Claim-time flexibility– Certainty
• Seller Needs– Risk profile– Profitable– Product in demand
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Pie-in-the-Sky Product
• Ideas