Ways to Maximize Participation - AALTCICO PRES1 02/05 Qualifying Prospects Ł Demographics Œ Average age of population = 40+ years of age Ł 60% over age 40 is better Ł Salary Œ

MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI

Long Term Care InsuranceLong Term Care Insurance

Ways to Maximize Participation

Dennis HealyDirector of Sales

John Hancock Group Long Term Care Insurance

Jeremy PincusPrincipal

The Forbes Consulting Group

For financial professional use only. Not for use with the public.

Long Term Care Insurance is underwritten by John Hancock Life Insurance Company, Boston, MA 02117MLBC PRES1 05/05


Long Term Care InsuranceLong Term Care Insurance 2

CO PRES1 02/05

Agenda

� Qualifying Prospects� Factors to consider before committing to the RFP

process

� Assessing Opportunities With Pre-solicited

Groups

� Case Studies of Second Solicitation Opportunities

� Industry Overview



Qualifying Prospects

Dennis HealyDirector of Sales

John Hancock Group Long Term Care Insurance


Long Term Care InsuranceLong Term Care Insurance 4CO PRES1 02/05

Qualifying Prospects Overview

• Demographics - Age, Salary

• Voluntary Benefit Participation -401(k), FSA, Supplemental Life

• Industry Type

• Employer Endorsement Factor

• Case Size

• Communication and Enrollment Process

• Plan Design

• Wild Cards

• Pre-Solicited Groups



CO PRES1 02/05


� Demographics� Average age of population = 40+ years of age

� 60% over age 40 is better

� Salary� 1.5 times the average salary in the state where the

employees reside

� Minimum of 35% of the population over $50,000annual salary

� Geographic Distribution� Are they centralized enough to effectively conduct

meetings



CO PRES1 02/05


� Voluntary Benefit Participation

� 401(k) - 80% or above

� 403b - 65% or above

� MFSA - 15% or better

� Supplemental Life - 40% or better

(less valuable if the base benefit is small)

� Auto and Home - 5% first year - 30%-40% ultimately

� Legal - 15%-20% first year



CO PRES1 02/05


� Industry Type

� White-collar, highly-educated preferred

� Law Firms, Universities, Bio-Tech/Pharmaceuticals,

Financial Services, Insurance, High Tech

� Employer-Endorsement Factor

� Difficult to gauge during sales process

� High, medium, low - will make or break enrollment



CO PRES1 02/05

Average Annual Premium by Industry

609

648

681

756

770

834

835

855

862

889

998

1001

1008

1136

1139

1145

1199

1283

1362

Food & Apparel

Automotive

Union

University

R&D

Insurance

Software

High Tech Manufacturing

Communications

Medical

Educational Services

Architecture

Aviation

Accounting

PR

Utilities

Finance

Law Firm

Advertising



CO PRES1 02/05


� Case Size� Large - May mean lower enrollment

� Small - Less margin for error

� Communications and Enrollment Process� Web access, supported by email campaign

� VRU

� Employee Meeting Access

� Internal Newsletter, Posters, Postcards, etc.

� Payroll Deduction versus Direct Billing

� Plan Design� Match to group

� Consider demographics

� Cost of care in geographic region



CO PRES1 02/05


� Wild Cards That Can Hurt

� Unstable work environment - layoffs?

� Media influences

� Geographic distribution

� Corporate affinity

� Inappropriate plan design

� Non-ERISA plan

� Administrative considerations



CO PRES1 02/05

Opportunities with Pre-Solicited Groups

� Why Employers Consider Moving Plans

� Carrier exiting industry

� Questioning carrier commitment

� Negative media attention on current carrier

� Unhappy with service of current carrier

� Looking for an upgrade to current plan

� Required to periodically test market



CO PRES1 02/05

Opportunities with Pre-Solicited Groups

� Questions to ask:1. Who is the current carrier?

2. Why do they want to switch?

3. Is there a transfer provision?

4. Was penetration significant?

5. When was enrollment first done?

6. Is plan design current?

7. Is rate structure still competitive?

8. Will new carrier be able to offer more attractive ratesand plan?

9. Are the demographics strong?



CO PRES1 02/05

Pre-Solicited Groups Replacing CarrierOptions

� Reserve Transfer

� Need significant size group to make worthwhile for

new carrier

� Complex communications to employees

� Labor intensive for carriers

� They may not be willing to do

� Employees are typically given a choice

� Expectations for second enrollment significantly lower

than first

� 1/3 of current insureds could be expected to move to new plan



CO PRES1 02/05

Pre-Solicited Groups Replacing CarrierOptions

� Solicit on a moving forward basis

� Insureds can stay with first carrier

� Drop and take new plan

� Stack coverage

� Reduced expectation because of prior penetration



CO PRES1 02/05

Case Study 1:10,300 University with Group Plan Since 1998

� Current participation: 6.5%

� Previous carrier exiting business

� No transfer provision

� Older plan design at less competitive rates

� Average age: 43

� Average salary: $59,000

� Good benefit participation

� Strong employer support

� Centralized location



CO PRES1 02/05


� Good opportunity:

� New rates and plan will look extremely attractive in

comparison to old plan even for insureds that enrolled 6

years ago

� Employees motivated to move for security reasons and

to maintain payroll deduction

� Significant size - even a low enrollment of 2%-3% will

generate enough premium to support plan

� Results:

� 9.8% enrollment!



CO PRES1 02/05


� Current participation: 5%


� Transfer provision may be available

� Good plan design with strong rates

� Average age: 45


� Strong benefit participation



Long Term Care InsuranceLong Term Care Insurance 19CO PRES1 02/05


• Questionable opportunity

• Not motivated to move for rates or plan design

• Lot of work to transfer if offered

• Unlikely to get more than 1/3 of insured population tomove

• Better to solicit on a moving forward basis and hope togrow over time



CO PRES1 02/05

Case Study 3: 1,500 University With Group PlanSince 1991, Upgraded in 2002

� Current participation: 9%


� No transfer provision

� Good plan design with strong rates

� Average age: 43


� Strong benefit participation




CO PRES1 02/05

Case Study 3: 1,500 University With Group PlanSince 1991, Upgraded in 2001

� Not an opportunity

� Not motivated to move for rates

� Too small to solicit on a moving forward basis



Industry Overview

Jeremy PincusPrincipal

The Forbes Consulting Group



CO PRES1 02/05

Analysis of GLTC Enrollments

� Key Business Questions

� Should we quote on ABC company?

� If we write the case, how can we maximize

participation?



CO PRES1 02/05

Analysis of GLTC Enrollments

� Research Technique� Qualitative review of case studies to identify comprehensive list of

~75 candidate factors

� First-ever multi-carrier database of ~250 distinct enrollments

� Aetna

� C.N.A.

� John Hancock

� MetLife

� LTC Partners

� Statistical modeling of GLTC participation

� OLS and Logistic Regression

� Separate analyses: Knowable, Controllable Factors



CO PRES1 02/05

Findings

� Knowable Factors

� Firmographics

� Demographics

� Controllable Factors

� Plan design & pricing

� Marketing & enrollment process



CO PRES1 02/05

Firmographics

� High, medium, and low performance groupsemerge

3%3%

3%

5%5%

5%5%5%

5%6%

7%

7%8%

8%9%9%

15%

0% 5% 10% 15% 20%

LawShipping

GovtChemicalUniversity

EnergyFinancial Services

Advt/MktgRetail

ManufacturingAerospace/Defense

PublishingBiotech

TechTelecom

HealthcareEducation

!

!

� Companies in the West, Southwest, Midwest leadin participation; the Northeast lags

19%

12%11%

10%10%9%

8% 7% 7% 7% 7% 7%6% 6%

5% 5% 5% 5%

0%

5%

10%

15%

20%

TX WI DC IL NC NV UT CA WA MO VA MI MA MD NY DE PA CT

Participation

by State

� Complete reversal of the 1990�s trend! Smallest companies now show strongest participation rate;

same as 401(k) market

9.9%

6.5% 6.9%

5.7%5.2%

4.6%

0%

5%

10%

15%

Lowest to

499

500-999 1000-2499 2500-4999 5000-9999 10000+

Number of Employees



CO PRES1 02/05

Demographics

� Participation peaks at average salaries in the $60,000s! Beware very low and very high average salaries

� Participation falls off �cliff� below 40%! Modest improvement beyond 40%

� Participation is higher among companies withsupp. life participation over 40%

2.6%

5.6%6.2%

8.1%

6.5%

0%

5%

10%

$13,000-

$39,999

$40,000-

$49,999

$50,000-

$59,999

$60,000-

$69,999

$70,000+

Average Salary

4.4%

6.3% 6.3%

8.6%

5.1%

0%

5%

10%

23-39% 40-49% 50-59% 60-69% 70%+

% Over Age 40

4.7%

6.3%6.8% 6.9%

0%

5%

10%

0-39% 40-49% 50-59% 60% to

Highest

% Female

6.0%

7.7%

0%

5%

10%

Less than 40% 40%+

Participation in Supplemental Life

� Participation peaks at 60% over 40



CO PRES1 02/05

Bottom Line: Which Knowable FactorsMatter Most?

!24%% Female

!35%Average age

!41%Average salary

Statistically significantPct of variance explainedVariables in the equation

Multiple regression identified a 3-factor predictive model:



CO PRES1 02/05

Number of Choices

� Dramatic decline inparticipation withincreasing number ofchoices

� Optional ROP shows thedetrimental effects ofadditional choices

8.1%

6.5%

5.4%

3.2%

0%

5%

10%

1 2 3 4

Number of Plan Choices

7.4%6.8%

1.6%

0%

5%

10%

Not Available Built in Optional

Return of Premium



CO PRES1 02/05

Plan Design

� The availability of a low-cost option drives higherparticipation

� When offered as an option,longest LMB consistentlygets 60% to 80% ofenrollment


7.2%

4.9%

0%

5%

10%

Facilities only option Comprehensive only

Availability of Low-Cost Option

7%

6%

0%

5%

10%

More than 5 yrs 5 yrs or less

Lifetime Maximum Benefit



CO PRES1 02/05

ABI vs. FPO


Availability of Low-Cost Option

Average Case Premium w/out ABI =

Average Case Premium with ABI =

� The Bad News:

� ABI is a necessary option,BUT�it�s expensive, complex,and raises doubts re: the valueof FPO plans

11.1%

6.2%

0%

5%

10%

15%

Not offered Offered as an option

ABI

� The Good News:

� The offer of ABI hurts

participation, BUT�it

generates significantly

higher case premium

$675

$975



CO PRES1 02/05

Enrollment Factors

4.4% 4.9%

7.5%

10.6%

0%

5%

10%

15%

2-4 Impressions 5-7 Impressions 8-10 Impressions 11+ Impressions

Number of Impressions

7.7%7.2%

3.9%

5.3%

0%

5%

10%

High Moderate Low Unknown

Level of Employer Support

By Payroll Deduction for Employees� An unsupportive employer isan enrollment killer�

� At least moderate support isessential

� It takes 8+ directcommunications to buildawareness, educate, andpersuade employees toenroll in GLTC



CO PRES1 02/05

Timing

By Payroll Deduction for Employees

� Best Timing: Immediatelybefore main benefitsenrollment period

� Worst Timing: Immediatelyafter main enrollment period

� September appears to be aparticularly good monthto enroll GLTC

3.9%

7.9%

5.6%

0%

5%

10%

15%

Off-cycle late Off-cycle early On-cycle

14.3%

20.0%

33.3%

10.0%

0%

10%

20%

30%

40%

50%

Q1 Q2 Q3 Q4



CO PRES1 02/05

Bottom Line: Which Controllable FactorsMatter Most?

!17%

Holding enrollment

period off-cycle (not in

Q4)

!19%Fewer separate choices

required to enroll

!19%Presence of low-cost

plan option

!21%

Communication

expenditure per

employee

!23%Moderate-to-High

employer support

Statistically significantPct of variance explainedVariables in the equation

Multiple regression identified a 5-factor predictive model:



CO PRES1 02/05

Key Implications (1)

� The credibility of the sponsor drives participation� (At least) moderate employer support is essential

� Far and away the #1 reason for purchase in FLTCIP

� �Surround-sound marketing� (multi-channel, multi-wave)is effective in building awareness, knowledge, andpurchase intention� Interaction between active sponsorship and strong marketing leads

to extremely high participation

� Be careful in communicating ABI� Simplify explanation and protect perceived value of FPO



CO PRES1 02/05

Key Implications (2)

� Too many choices is an enrollment killer� Resist temptation to be �all things to all people�

� Tailor bundles of plan design, pricing, and messaging to a few keysegments

� Low cost options make LTCI accessible, driving up participation(evidence in database and CalPERS)

� Learn the �sweet spots� in the market� You can have too much of a good thing: income, average age,

% female

� Track participation within segments, instead of aggregate, for atruer measure of performance

� Use knowledge of segments to develop integrated message, plandesign, & premium threshold

Documents

Ways to Maximize Participation - AALTCICO PRES1 02/05 Qualifying Prospects Ł Demographics Œ Average age of population = 40+ years of age Ł 60% over age 40 is better Ł Salary Œ