How to Prosper in the New World of Fewer Carriers, Increased

Premiums and Stricter Underwriting

Harley Gordon

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Agenda…

The new math

The new marketplace

Penetrating the marketplace

Repositioning yourself to succeed

The message

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Some quick notes..

Consider the term extended care

Men are serious centers of influence They do not respond to risk They will however respond to

consequences

The new math

Carriers were divided into two business models

Public companies: Short-term: Buy market share Price aggressively “Flexible” underwriting Aggressive compensation Re-price opportunistically

Mutual fund business model: Long-term Not driven to buy market share Price conservatively Stricter underwriting Rational payouts Dividends if claims are favorable

The mutual fund model won

All carriers share the same model Price conservatively Strict underwriting Rational compensation

The historical marketplace of selling from leads that generated those with Prior experience with modest net worth Health issues

The new marketplace…

The market has shifted irrevocably to those With no prior experience The wealthy

Two reasons1. Those with no prior experience are far more

likely to be underwritten2. The wealthy can afford the premiums which

now reflect the risk

Penetrating the marketplace

COIs are the key to success

Financial advisors

Attorneys Domestic relations Special needs

CPA’s / accountants

Current strategy…

Educate COI about… The client’s risk of needing care backed by statistics The cost of that care and how it impact the client’s

finances Perhaps the risk of being sued

Then educate the professional about how LTCi… Protects assets Allows for independence, choice of care and where it

is delivered

Position yourself as a long-term care insurance professional and

suggest they work with you…

May I ask youMay I ask you……does it appear to be working?does it appear to be working?

What’s missing…

A. Not enough time spent on what the product does or features?

B. Failure to more fully explain your area of expertise?

C. Failure to understand their culture?

D. They simply don’t get insurance

C

The result often is…

FA’s “yes you to death” and then…

Pick and choose who they send to you…

If they have “X ” in assets they don’t need LTCi

They don’t have enough to protect Those who are destined to be declined

CPA’s & attorneys “yes you to death” and then…

Pick and choose who they send to you…

If they have “X ” in assets they don’t need LTCi They don’t have enough to protect Those who are destined to be declined

Four Steps To SuccessFour Steps To Success

Step 1Step 1: Understand their : Understand their cultureculture

A financial service professional’s culture is planning They sell advice not product That advice leads to a plan The plan is funded with the client’s assets

A Life & DI professional’s culture is planning They sell advice not product The advice leads to a plan The plan is funded with life insurance / disability

income insurance

The culture of estate planning attorneys is planning They sell advice that leads to a plan

CPA’s work in a culture of planning They sell advice that leads to a plan

In effect, they are inIn effect, they are in the education business the education business

Step 2: Develop a message consistent with their culture of education and planning

Consultative Engagement:A selling philosophy consistent

with your targeted audience

Consultative Engagement consists of educating a client about how severe the consequences to those he (or she) loves would be if (never when) an unexpected event happened

Once educated, the client has to make a decision. He may decide… Those consequences are not severe; or They are severe enough that he will want

you to take action to protect those he loves

Consultative Engagement is about education

You want to be in the education business

Step 3: Have mastery over the subject matter &

consequences

This you know… The need for care is caused by two

impairments: physical & cognitive

This you may want to know… As impairments progress they:

Severely compromise the ability of the individual to get through the most basic of daily routines and or

Severely compromise the agility of the individual to safely interact with others or their environment

“Compromise” is a critical word. It shifts the discussion from “him” to “them”

In turn, this sets into motion the two sets of serious consequences providing care has on “them”

1. Emotional & physical consequences Others must put their lives aside; They

have no choice This has a direct impact on their emotional

& physical wellbeing

2. Financial consequences Paying for care, by definition calls for a

reallocation of income and assets. It therefore disrupts retirement plans

Step 4: Educating the center of influence

Let’s start with this…

You want to earn the right to “sit at the table” with COIs

Position yourself not as a presenter of product for which COIs may or may not have interest in but…

A presenter of education about a subject matter that if left unattended could have severe consequences to the plans they created for their clients

Deploying Consultative Engagement

Consultative Engagement consists of educating a client (COI) about how severe the consequences to his business model would be if an unexpected event happened Once educated the COI is compelled to make a

decision. If he believes they are serious enough he will likely employ your services

Your job therefore is to educate the COI about the two sets of consequences

Putting theory into action:Expect what they think you will do,

…and then do the opposite

Expect they think the discussion will focus on the risk of “him” (the client) needing care… Talk instead about the subject of extended

care and its consequences to “them”

Expect they think the discussion will be about product & features… Talk instead about the need to create a plan

to mitigate consequences

Talking points re: Emotional & Physical

Consequences

Extended care is not a condition like Parkinson’s, dementia, stroke or diabetes

Extended care is not a place like a nursing home or assisted living

Extended care is a life changing event that has serious consequences to those who have no choice but to provide care

By definition providing care is all-consuming. This causes unintended serious consequences:

Providing care to chronically ill people often makes healthy caregivers chronically ill

It usually requires a child to put her life aside causing it’s own set of consequences

Her relationship with siblings that don’t help is severely disrupted

Providing care generally does not bring families together…

It tears them apart

If a client ever needs care, his or her life is not likely to end…

Someone else’s life is likely to end

Talking points re: Financial Consequences

Paying for care requires a reallocation of income &

assets…

By definition it disrupts a tax plan Life & DI professionals understand this message FAs understand this message Estate planning attorneys understand this

message CPAs understand this message

By definition is disrupts a plan to allocate income to keep financial commitments FAs understand this message

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By definition it disrupts a plan to wait out a down market FAs understand this message

By definition it disrupts a special needs plan Estate planning attorneys understand this

message Life, DI professionals understand this

message

Then offer a plan to mitigate the consequences you just educated the COI about

The plan is to keep the client safe at home while mitigating the two sets of consequences

Put another way the plan is to place the family back to where they were, as best as possible prior to an unexpected… Death Disability Need for care

Be prepared deal with objections & misconceptions …

My client has sufficient assets to pay for care

Assets don’t pay for care, income does. The problem is that paying for care forces a reallocation of income directly effecting the client’s ability to keep financial commitments

$600,000 = $30,000 *

$1,000,000 = $50,000*

$1,500,000 = $75,000*

$2,000,000 = $100,000*

* Assuming a 5% return, before taxes and that 100% of portfolio is committed to income

Even so, my client has more than sufficient assets to pay for care

That’s true, but a couple of thoughts… Taxes on the sale of assets Selling into a down market Liquidity

Then there’s the very real issue of who, where & how…

Who is going to provide the care?

Where is it going to be delivered?

How will it be coordinated over the years care may be necessary

By definition your client will likely not be able to make these decisions forcing others to do so

Then educate the COI about what LTCi really does…

It provides a stream of income that is used to pay for care. By doing so it allows those he loves to…

Supervise rather than provide care. If there are children this becomes…

A second gift of life

Having others provide care mitigates the first set of consequences

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Since care is paid for, income does not have to be reallocated. This allows the client to keep prior financial commitments

Since little or no funds have to be used the retirement plan remains uninterrupted

Having someone else pay for care therefore mitigates the second set of consequences

Summary…

Understanding the culture of those you want to work with allows you to create a message that resonates with them

If they are educators about a subject that has an impact on their clients whether it is law, finances or taxes…

Then you want to be perceived as an educator about a subject that is of critical importance to the COI’s mission

30 second elevator speech…

I am in the the field of extended care. I work with attorneys CPAs and financial service professionals to help them create a plan that protects the emotional, physical and financial wellbeing of their client’s families