LIFE & HEALTH ADVISOR
Mid-Atlantic Edition
Volume 4, Number 2
August, 2002

Selling to a New Generation of Seniors

By Ed Berube
President and Chief Executive Officer
Bankers Life and Casualty Company

The face of senior America is changing. The next 10 to 20 years will see this market evolve from one dominated by the experience of the 1930s depression and World War II to one driven by a new mindset, brought on by the baby boomer generation. This new generation of seniors has experienced a world politically, financially and technologically different from the world previous generations knew.

They have lived through the moon landing, the Vietnam War, the fuel shortage, the fall of the Berlin wall and the Soviet Union, the bull market of the '90s, and most recently the tragedy of September 11. They have also witnessed amazing advancements including the very first computers, 8-track tapes, fax machines, cell phones, CDs and medical wonders like kidney and heart transplants, test tube babies and genetic cloning.

Seniors are no longer hoarding their money in CDs or savings accounts. They are investing in the stock market and taking advantage of financial options from money market accounts to annuities to reverse mortgages. They are working longer and planning active retirements. And because boomers are expected to live longer than previous generations, the greater likelihood of sickness and incapacity will increase their chances of requiring long term care services. These trends create a broader and more urgent need for long term care and will push overall long term care expenditures higher.

While most baby boomers are less than eager to discuss long term care planning, when they do come to the table there are several points agents can make to assist seniors in the long term care planning process:

• Always include information on Medicare and Medicaid when discussing long term care insurance protection.
• Encourage clients to budget long term care insurance costs as part of their overall retirement planning. Compare the estimated monthly income from Social Security, 401Ks and other pension plans and savings against estimated monthly expenses to determine the level of long term care protection a person or couple needs and can afford.
• Investigate long term care policy options. Policy features, benefits and pricing can vary dramatically from company to company and policy to policy. Policy premiums also vary based on age, health and level of coverage.
• Include family members in the planning. Clients may feel more at ease by having those closest to them support their decisions and be available to provide additional encouragement and advice.
• Use real life examples to demonstrate how long term care insurance helps maintain a prospective policyholder's personal security and independence.

Selling Long Term Care Insurance

The single most common insurance myth among seniors is that Medicare will adequately cover long term care, should the need ever arise. This is simply not true. Medicare provides only limited coverage for short periods of time for acute nursing home care, leaving no benefits for the custodial needs attributed to long term care.

Medicaid is the only government-sponsored program that does cover long term care costs, but only for the poor. In order to qualify, federal law requires an individual's assets to be less than $2,000 (excluding home). For couples receiving nursing home care together, the amount is $3,000.

Many people do not initially meet Medicaid qualifications. In order to qualify for Medicaid long term care benefits, they must first spend down their assets, except their home. Although there are laws that protect the assets of a spouse, the Omnibus Budget Reconciliation Act of 1993 requires states to try to recover the cost of Medicaid benefits from the estates of certain nursing home residents. As a result, family homes and businesses that might otherwise have been passed on to family members often need to be sold to repay the government for Medicaid costs.

In recent years, rapidly rising costs associated with long term care for seniors have burdened the Medicare and Medicaid systems. Laws are in the process of changing. Bills are currently in both the Senate and the House of Representatives that will provide a long term care tax deduction to encourage individuals to purchase private long term care insurance.

Some seniors do not believe they will ever need long term care. The facts state something very different. By the time they reach age 65, seniors face at least a 40 percent lifetime risk of entering a nursing home.¹

Integral to successfully selling long term care insurance is the forecasting of future long term care costs. On average, older Americans can expect to pay $46,000 per year or more for long term care.¹ Calculated over a lifetime, women aged 55-64, for example, can expect to pay more than $150,000 in long term care costs.² As baby boomers age, the demand for nursing home care will continue to drive prices higher. According to the Census Bureau 1.5 million older Americans are currently living in nursing homes and that number is projected to double by 2020.³

The sooner people start planning for their long term care coverage, the more affordable and available the coverage will be. The earlier the coverage the less expensive it is and the less likely the coverage will be declined for health reasons.

Making the Emotional Connection

Beyond simply looking at costs and benefits, the agent must pay careful attention to the emotional challenges that accompany the purchase of long term care insurance. Americans have a natural aversion to growing older. The single best way to overcome this challenge is through education. People need to be advised about the benefits of planning early and disturbed about the consequences of waiting too long.

Unfortunately, many seniors hold onto the expectation that their children will take care of them when a need for long term care arises. Times are changing. New family structures, work commitments and long distances between family units all limit care-giving options and opportunities.

Many adult children are caught in the "sandwich generation". They are faced with the challenge of taking care of both their aging parents and their own children. Most are unable to materially help their parents cover substantial nursing home, assisted living or home health care costs.

Agents can help their clients address these challenges by actively involving the family in the planning and decision making process. The use of personal or third party real life stories also helps clients envision the significant benefits of planning for long term care. By offering quality products and sound advice, agents can help seniors maintain their physical, emotional and financial independence.

The key to selling insurance to a new generation of seniors is not about numbers or need, but about relationships. Agents must create a sense of trust, comfort and confidence in seniors. They must exhibit genuine conviction in the benefits of the products and services they provide and genuine commitment to do all that is required to meet the needs of the seniors they serve.

¹ HIAA Guide to Long Term Healthcare (Updated 12/12/99)
² Unpublished, "Long Term Care Utilization Model," by LifePlans, Inc. (1997)
³ The Chicago Tribune, December 14 and 15, 1997

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