AN OUTSIDE--IN VIEW OF THE LTCI INDUSTRY
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Transcript of AN OUTSIDE--IN VIEW OF THE LTCI INDUSTRY
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AN OUTSIDE--IN VIEWOF THE LTCI INDUSTRY
Session 5: February 27, 2006
Session Producer:
Ty Wooldridge, Chief Actuary
Genworth Financial
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PANEL
Eric BergLehman Brothers
Neal FreedmanStandard & Poor’s
Jeremy PincusThe Forbes Consulting Group, Inc.
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Eric Berg
Life Insurance Analyst
Lehman Brothers
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Neal Freedman
Associate DirectorStandard & Poor's
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LTC Insurance Industry Overview:
Opportunities for Profitable Growth
Jeremy Pincus, Ph.D.
Principal
Forbes Consulting Group
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Industry Overview• You’ve heard the bad news
• I bring you good news and a message of hope
• There are three steps that can unlock enormous opportunity:
1. Get to know a profitable consumer market niche and align your product and brand with it
2. Align with proven distribution to that niche
3. Use your success to invite more competition
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I. Focus On A Profitable Market Niche
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One Size Does Not Fit All
…avoid the folly of trying to be all things to all people
Pick a customer segment and own it…
Align distribution, marketing, style, tone, branding, and product with needs and preferences of your target segment.
Align distribution, marketing, style, tone, branding, and product with needs and preferences of your target segment.
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Comfort
Independence/Control
Comfort
Independence/Control
Unconcerned w/ burdening family or personal well-being
Denial/Cannot accept aging
Unconcerned w/ burdening family or personal well-being
Denial/Cannot accept aging
Motivated to protect family from burden
of LTC
Seek to preserve assets
Motivated to protect family from burden
of LTC
Seek to preserve assets
“Family should take care of their own”
“I’d rather die than live in a nursing home”
Price sensitive
“Family should take care of their own”
“I’d rather die than live in a nursing home”
Price sensitive
Self-
oriented
Self-
oriented
Four Segments That Think About LTC In Completely Different Ways
Family-
oriented
Family-
oriented
Planners Non-Planners
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Each type “ripens” at a different age…
4 Types x 3 Age Groups = 12 Segments
FamilyFamily
SelfSelf
FamilyFamily
Self Self
40-49 50-59 60-74Orientation
Pla
nner
sN
on-P
lann
ers
Fear for FamilyPassive BurdenedHead in the Sand
Family-Centric Confident CouplesComfortable
Realists
Value-SeekingFading DenialLive for Now
Independence Driven Self-Directed Singles Diligent Preservers
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Who Is Your Target Customer And What Do They Care Deeply About?
– What are you really selling? – What are your customers really buying?
Control over Quality of Care
Control over Quality of Care
Compound Inflation
Compound Inflation
Immediate Risk (Accident, MS)
Immediate Risk (Accident, MS)
Shared Family Benefits
Shared Family Benefits
Protect Family & Inheritance
Protect Family & Inheritance
Unlimited Coverage
Unlimited Coverage
Avoid Nursing Home
Avoid Nursing Home
Informal CareInformal Care
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II. You Will Benefit From Increased Distribution
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Career agents
Independent brokers
Certified Senior Advisor (CSA)
Certified in Long-Term Care (CLTC) Long-Term Care
Professional 0
50000
100000
150000
200000
Distribution Needs To Expand
Market growth is hampered by the limited number of true LTC specialists, estimated at approximately 8,000, compounded by
a shrinking agent pool.
Market growth is hampered by the limited number of true LTC specialists, estimated at approximately 8,000, compounded by
a shrinking agent pool.
178,000
13,000
161,000
8,000 2,000
Due to the complexity of the product and sale, LTC specialists
have been needed
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Why Current Distribution Is Inadequate
• The ~8,000 specialists can only reach a small fraction of the potential market for LTC insurance (82 million)– Each LTCi specialist would
need to meet with 10,250 prospects
– If each of the 8,000 LTCi specialists sold one policy every work day, only 2% of the available market would be penetrated each year
• Higher priced new policies largely account for the decline in sales– A 20-25% increase in premiums is associated with a 30%
decline in sales, due to price elasticity of demand that exceeds 1.0 at target ages (40-59)
It’s Getting Harder To Sell
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2% 5% 10% 15% 20% 30% 40% 50% 60%
Source: LIMRA, HIAA
LTC Market Growth Dynamics
Avg. Premium per Insured (2004) = $1,900
Avg. Premium per Insured (2000) = $1,677
Avg. Premium per Insured (2005) = $2,100
Demand (% finding price acceptable)
Pri
cin
g o
f N
ew P
oli
cie
s
Distribution Is Shifting From One-to-One To One-to-Many
• Employer sponsored LTC sales growth (35% per year) is outpacing individual LTC sales growth (13% per year) [Milliman]
• Multi-life worksite sales are increasingly driving the individual market, particularly limited-pay executive carve-out plans
– The top independent LTC brokerages are targeting this form of sale to older Baby Boomers.
• Expanded or National Partnership– Evidence by some carriers reveals that the sales of
Partnership policies already have outpaced non-partnership policies [NAHU]
• 12% of all policies in-force in NY are Partnership 36% of all MetLife individual policies are Partnership
Employer-Sponsored
Group20%+
Multi-Life10%+
Individual & Association
80%
Expanding distribution will require product simplification, standardization, and affordability. Partnership expansion can be a
catalyst for all three.
Expanding distribution will require product simplification, standardization, and affordability. Partnership expansion can be a
catalyst for all three.
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III. You Will Benefit From More Competition
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Group LTC
Individual LTC
Auto
Homeowners Life
0
10
20
30
40
50
60
70
80
90
100
Mar
ket
Sh
are
of
To
p 4
Fir
ms
LTC Insurance Sales Are Overly Concentrated
4-Firm Concentration Ratios
Who’s concerned? • Lawmakers who see private LTCi as potential solution• Wall Street and Rating Agencies are worried about risk and returns• Carrier executives are worried about “going it alone”• Producers are worried about carrier commitment
Who’s concerned? • Lawmakers who see private LTCi as potential solution• Wall Street and Rating Agencies are worried about risk and returns• Carrier executives are worried about “going it alone”• Producers are worried about carrier commitment
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0%
20%
40%
60%
80%
2001 2002 2003 2004 2005
…And Market ConcentrationIs Increasing
4-Firm Concentration Ratios
53% 54%57%
66%69%
Individual LTC Insurance Market Share of New Sales (Premium)
Benefits of Increased Competition• The LTC Industry is too concentrated to generate
sufficient “share of voice”• The largest insurance companies/largest insurance
advertisers do not currently sell LTC insurance at all:– AIG (#1)– ING (#2)– AXA (#3)– Zurich
LTC Market Growth Dynamics
Share of Voice for LTC is limited to press releases and small-scale print advertising run by a handful of companies.
Large scale awareness campaigns are left to government programs (Medicare’s Own Your Future).
Share of Voice for LTC is limited to press releases and small-scale print advertising run by a handful of companies.
Large scale awareness campaigns are left to government programs (Medicare’s Own Your Future).
– Liberty Mutual– The Hartford– Sun Life
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The Little CMO Who Could