Ron Hagelman Archives - Long Term Care Insurance Expert | Honey Leveen

Ding Dong the Wicked Witch of LTCi Rate Hikes is Dead

September 9, 2016 by Honey Leave a Comment

The following is a guest blog by my friend and highly respected LTCi colleague, Ron Hagelman, who can be reached at rhagelman@broadtowerinsurance.com, www.BroadtowerInsurance.com.

The article laments the undeserved, unintended ill-will earned by the LTCi industry. Ron’s sentiment matches my own and expresses the widespread confidence of LTCi actuaries that LTCi pricing is now extremely rate stable. Here are blogs I’ve written about rate hikes.

Here is info on the Society of Actuaries study Ron refers to. Thanks, Ron, for allowing me to re-publish this.

“There are simply those who, even after repeated exposure to the glare of the truth, are subsequently unable to admit they were wrong. Our industry suffers seriously from this flaw in human behavior. Far too many have conveniently pointed the finger of blame at those responsible for our lifeless interest environment (whoever those people are) and not taken sufficient responsibility for the “mistakes” that were made in our past pricing assumptions. “We” got it way wrong and the damage done to all concerned is much more extensive than many are willing to admit. Stand-alone LTCI sales are a shadow of their former selves. The destruction to new sales caused by repeated rate increases is pervasive and insidious. We have unfortunately created a general public malaise and aversion to all things LTCI both in terms of those who we said were the smart ones for leveraging their risk early and those prospective buyers considering the security of policy ownership. What is of course much worse is that we have successfully decimated the ranks of those willing to help sell the product. The age-old equation is now painfully obvious to all concerned: rising premium creating falling sales culminating in a drastically reduced field force. This artificially created sales spiral is much more than just a self-fulfilling prophecy. We must first admit that it is also a self-inflicted wound.

We must first freely admit and acknowledge our own culpability. Frankly, we over built benefits, underpriced mortality and morbidity, and overestimated potential sales in the initial rush to achieve market share. We completely missed the whole side of the barn in terms of persistency and honestly we were basing our future experience on far too little actual claims data.

That Has All Changed!

“Ding Dong the Wicked (Rate Increase) Witch is Dead!” The Society of Actuaries has recently completed a research project designed specifically to evaluate the historical potential for rate increases. The research clearly indicates that products priced today are much less likely to have future rate increases. What is absolutely certain over the last 15 years is that the need for long term care services and support, the growth of assets and income needing protection, and the certainty of a need for expensive care is now greater than ever. We have also accumulated a substantial volume of claims information upon which to more accurately base current pricing.

The conclusion of the SOA analysis is that confidence in current pricing “should” be at an all-time high. Claims data is no longer scarce. We have an abundance of claims to evaluate at this time, meaning we have reduced the potential likelihood of future rate actions. According to the SOA, “Premium stability on today’s LTCI prod- ucts is at its highest.” The SOA identified a number of benefits of the new pricing stability as the study found that, “Claim experience nationwide in 2014 was 70 times more credible than in 2000.” The fact that we now have a history to evaluate has laid the groundwork for future carrier optimism concerning this market. Pricing stability contributes to:

Greater carrier confidence in assumptions concerning lapse, morbidity and mortality.
Less operational administrative risk translating into lower expenses. Constant change is expensive.
Less friction on the regulatory level and potential stress on reserves.

Restoration of consumer confidence at this point is a massive undertaking.

The Study also illuminated the validity of what we knew were serious contributing factors:

Long term investment return has fallen dramatically from 6.4 percent in 2000 to 4.6 percent in 2014.
Commissions have crept up during the same period of time, emphasizing first year compensation, and while administration expenses have declined.
Based on experience, allowable margins for error have also increased.

What is important is that we have learned from our experience and that the relative predictability of current premiums has risen from a low of a 40 percent chance of a future need to raise premiums to only 10 percent today. The study also pointed out that the regulatory environment has provided evolving strength by implementing the necessity of providing adequate margins for adverse circumstances under the NAIC Model Regulations beginning in 2000 and subsequently enhanced in 2009 and 2014.

The journey now standing before us must certainly begin by joining hands with those new friends willing to take that first step on the yellow brick road as we must ask the wizard to help us restore the faith of consumers and agents alike. Together we must recognize that we have indeed survived the flying monkeys and that our strength of purpose to find a home for the risk that will not be ignored was always built upon our brains, our heart and our courage.

Other than that I have no opinion on the subject.”

Impurities

February 11, 2016 by Honey Leave a Comment

I am a huge, long-time admirer of Ron Hagelman.

In his February, 2016 Broker World Magazine column titled, “Impurities,” Ron compares the long-term care insurance (LTCi) industry’s evolution to that of classic sculpture. Rodin’s painstakingly slow, thoughtful, methodical, reflective chipping away at a plain block of marble resulted in the timeless magnificence of his sculptures.

Similarly, the LTCi industry has also evolved and reacted over many years with thoughtful, holistic tweaks, adjustments and adaptations to its products.

Ron and I are both very hopeful about today’s LTCi products. We like them, they’re effective, they work. I’ve seen hundreds of claims get paid to my policyholders.

Ron cites the 2014 Society of Actuaries LTC Section study “LTC New Business Pricing: How Safe Is It?” as evidence the LTCi industry has learned from experience. Here’s a blog I did about this study. Today’s LTCi products are priced correctly. Rate hikes on today’s policies should be unusual and not of great consequence.

Here is Ron’s column in its entirety:

The inherent beauty of universally recognized “art” is something that is created as a process of elimination. Michelangelo released David from a solid block of inanimate marble. By methodically chipping away and discarding what was not necessary, something of permanence and exception was revealed. By systematically removing impurities something of transcendent truth may be discovered. The artist involved is actually only a facilitator guided by previous rules of engagement and extensive experience in the pursuit of lasting accomplishment.

Although it may be a stretch to compare the current residue of our grand LTCI experiment to the artistry of Auguste Rodin, it is impossible to ignore our ongoing intention to create something of substance and beauty. Our industry’s dedicated attempt to define and serve a public outcry to diminish the financial and emotional impact of unattended and ill prepared chronic illness risk has certainly represented a historic process of elimination. We have accumulated substantial experience and we have consistently removed the parts that were not working. If it was superfluous, ineffective, overpriced or undersold it has been trimmed away. Our 20-plus year hard headed crusade to expose the reality of the risk and identify a cost effective insurance management tool may be finally beginning to reveal an object of permanence and purpose. Public and private initiatives to reform and improve the market have begun to narrow their focus and solidify around the essentials of future success:

• All the moving parts require attention and some form of structural cooperation between the insurance industry and imbedded governmental support will be required.

• Most claims are fairly small and middle market benefits need to focus on upfront expense and immediate support. By the same token the potential for catastrophic risk must remain at the heart of the individual sale for the more affluent.

• Regulatory reform is now mandatory from the NAIC to state and federal legislatures. This should include greater benefit flexibility and a willingness to consider innovative ideas. Why not allow immediate long term care access to current tax preferred accounts? Additional tax incentives should also include an enhancement review of existing tax deferrals, premium deductions and credits.

Perhaps the clearest evidence of our ability to remove impurities can be found in the recent research conducted by the SOA’s LTC Section and the ILTCI offering LTCI New Business Pricing: How Safe Is It? The primary question asked was to identify any differences between past and current pricing stability. I don’t think anyone would argue with the notion that rate increases are the primary scourge of consumer confidence and lackluster sales. The question is: Have we learned from our marketing mistakes and our growing volume of claims data? The truth is we have learned from experience. We do have more information to fine tune pricing assumptions. We are offering less risky product and the actuaries are using better modeling tools. Rate increases are, of course, the result of the inherent clash of current reality versus the initial assumptions concerning lapse rates, morbidity and mortality. The research team looked at three dates for comparison purposes (2000, 2007 and 2014). Our current volume of claims experience has taught us that our morbidity experience was somewhat worse than anticipated over time. Our mortality rates are now more conservative, and as you well know our lapse rates are now much more conservative. The companies have learned from each other and premiums have stabilized with very little difference today in pricing between carriers. The bottom line is we simply have much more information on which to base future assumptions. For example, we are able to evaluate 16 times as much data in 2014 as in 2000 for all policy years and 70 times as much claims information. The reliability of current pricing as it relates to the possibility of future rate increases has increased dramatically over time. In 2000 the chances of future rate increases was about 40 percent, in 2007 it was 30 percent. However, in 2014 it was only 10 percent. The profitability of the product has also increased—caused by bone on bone lapse assumptions, better understanding of the claim and a low predictable interest rate environment.

We do apparently learn from our mistakes. We can adjust to new realities. We do profit from accumulated sales wisdom. It’s not getting any easier, but it does seem to be emerging from relative chaos into a clear and trustworthy vision sculpted and solidified by experience. We have all accumulated our share of marble dust helping to create a transcendent image void of disfiguring impurities. We may yet gaze upon a sculpture that will withstand the test of time.

Other than that I have no opinion on the subject.

Author’s Bio
Ronald R. Hagelman Jr., CLTC, CSA, LTCP
CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products. A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing “friend” of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman is president of Broadtower Insurance Solutions, a national IMO helping BGAs enhance LTCI production. Hagelman can be reached at Broadtower Insurance Solutions, Inc., 156 N. Solms Rd., New Braunfels, TX 78132. Telephone: 830-620-4066. Email: rhagelman@broadtowerinsurancesolutions.com. Website: www.BroadtowerInsurance.com.

LTCi…Who Cares?

February 21, 2015 by Honey Leveen Leave a Comment

I’ve re-published below my friend and colleague Ron Hagelman’s October 2014 Broker World Magazine column. Ron writes eloquently and from his heart. Plus, he is fun to read. He explains why buying long-term care insurance (LTCi) will always be less about wealth preservation and more about love. The primary reasons my clients buy LTCi are to show kindness, consideration and love to themselves and their families.

Ron has a knack for describing the frustration and concern I experience on a daily basis. Most people refuse to think about what might happen to them in the last years of their lives, so far in the future.

I love you, Ron!

Here is Ron’s column, titled, “LTCi…Who Cares?”:

The frustration inherent in the title is not the point. Surveys continue to point out the obvious: As far as the future of the LTCI industry is concerned, familiarity with the pain and stress of caregiving in America remains the most reliable motivation to buy. The most recent U.S. census information confirms the inexorable progression of an aging population with 13 percent of our population currently over 65, rising to 20 percent by the year 2030. Institutional care has never been the answer. Nursing home populations have decreased by 20 percent since the year 2000. Although the growth of assisted living alternatives has been noticeable, seniors would of course rather receive care at home if at all possible. A report just released by the U.S. Census Bureau, “65+ in the U.S. 2010,” confirms what we already suspected: “90 percent of people older than 50 express the preference to be cared for in their own home.” The problem of course is who will provide that care. In another recent poll, 75 percent of seniors reported they could only identify two people who might help them when the time came that they needed care.

Finding care may be the single largest problem we all will face when the need for care arises. The fact is that roughly 70 percent of all informal care comes from relatives. This is, however, a vanishing resource. According to the new AARP study, “The Aging of the Baby Boom and the Growing Care Gap,” the ratio of potential family caregivers to high risk people in their eighties is falling rapidly. Although seven to one in 2010, it is expected to drop to four to one by 2023, and three to one in 2050. There is no alternative but to shift to more paid caregivers, which will dramatically increase the cost of future long term care. I think we can all agree that perhaps the hardest part of the sales conversation is explaining the real risk and convincing your prospect that, “Yes, this can happen to you!” Improper, misguided and inadequate planning remains our curse. (Amen, Ron!)

Although most buyers claim that protecting assets is their primary motivation for acquiring coverage, the purchase of LTCI is never just about the money. Just as a long term care event is never just about the person needing care—it is about all those family members willing to respond to the problem, which can severely impact their own finances and their careers (including their own health issues aggravated by the stress of caregiving). The bottom line is that attempting to plan for long term care is not simply a financial decision. There are more important questions concerning who will provide your care, in what setting will it take place, to what extent do you plan to involve family members, and from exactly where will the money arrive? Please recognize that it is immediate family, those for whom the insured cares the most, who will bear the burden of care. Eighty percent of the time, informal caregivers are the most immediate family, including spouses, daughters, daughters-in-law, and sons-in-law. Caregiving, especially from spouses, may represent a substantial threat to the caregiver’s health, accelerating their own need for long term care. Usually there is a progression of care from part time assistance to full time maintenance, and as we know, as the need for care increases, the importance of freedom of choice and the quality of that care also increases.

A strong recommendation is to include your anticipated plan for care and available funding dedicated to that purpose in a separate “Care Agreement.” Too often families find themselves thrust into a care event for which no one was prepared. It is estimated that one-quarter of all Americans are currently receiving care. For 10 years this column has attempted to explore why what may represent America’s largest underinsured, under-planned and under-prepared risk remains at the end of the planning conversation instead of at its heart. Too many on both sides of the sale continue to ignore the obvious at their own peril. By not making the risk a required universal recognition and featuring its resolution as a centerpiece of everyone’s planning practice, we unnecessarily jeopardize consumer confidence, agent ethics and company relevance.

Other than that I have no opinion on the subject.

Author’s Bio
Ronald R. Hagelman Jr., CLTC, CSA, LTCP
CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products. A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing “friend” of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman is president of Broadtower Insurance Solutions, a national IMO helping BGAs enhance LTCI production. Hagelman can be reached at Broadtower Insurance Solutions, Inc., 156 N. Solms Rd., New Braunfels, TX 78132. Telephone: 830-620-4066. Email: rhagelman@broadtowerinsurancesolutions.com. Website: www.BroadtowerInsurance.com.

Ron, another great column!

June 2, 2011 by Honey Leave a Comment

Thanks to my friend and colleague, Ron Hagelman, for another great column, featured in the May 2011 edition of Broker’s World.

Ron, a noted national long-term care insurance (LTCi) expert, is as concerned about the public’s denial of possible LTC needs as I am. He sees the same things I do and is just as frustrated. His sense of humor is better than mine, however.

Here’s Ron’s piece, called “Faulty Wiring”. It uses the analogy of faulty wiring to describe the public’s disconnect when it comes to responsible long-term care planning.

I saw my hairdresser today. She’s a cancer survivor who’s insurable. Last month she told me she was squeezed and could not afford LTCi: no way, no how. Today she told me she would be gone three weeks. She’s traveling to Italy. She can afford Italy, but not $100/month for LTCi premiums. This type of denial is what Ron and I face daily. We are both highly concerned because we’ve seen how well things turn out for people who need care and own LTCi. We see how sad the situation often is for people who don’t own LTCi.

I Love You, Ron Hagelman

April 21, 2011 by Honey Leave a Comment

Here’s a link to Ron Hagelman’s column in the March, 2011 edition of Broker World Magazine.

An excerpt from Ron’s piece:

“As mentioned in earlier columns: There is an elephant in the room that will not go away. Its presence should be crowding out any breathing room remaining to maintain a seemingly impenetrable wall of self-deception. In recent speeches, our Health and Human Services Secretary has concluded her long term care conversation by clearly defining the presence of the massive pachyderm: ‘In the years to come, nearly every American family will have a grandmother or a father or a sister or a son who needs daily help because of a disability.’

As one of those involved in sales every day, I remain puzzled, perplexed and peeved at the amazingly resilient ability to ignore the size, girth and smell of our extra large peanut-eating friend. It must somehow appear not to be a real elephant. It must miraculously be seen as only the illusion of an elephant.

The only way I can explain the persistent ability to so completely ignore the obvious is that this must be the proverbial pink elephant. An elephant that can appear and disappear based on one’s level of alcohol intake. But don’t be fooled, that pink elephant is on a 24/7 eating binge!

Again quoting the HHS ringmaster: ‘Approximately 10 million Americans need long term care services and support, ranging from having an aide visit for a few hours a week to living in a nursing home with around the clock care. As Americans age, that number will rise steadily; by 2020, the estimate is that 15 million Americans will need some kind of care…We know that one out of six people who reach the age of 65 will spend more than $100,000 on long term care.’”

Ron, I love you. Thanks for making me laugh out loud. I read this to my husband, and although he is not involved in the insurance industry, he enjoyed a hearty laugh, too – especially because he HAS long-term care insurance.

Although my colleague Ron writes for a trade journal, “lay” readers will easily understand it. I hope you’ll read Ron’s column. Be amused, but take what he says to heart.

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Ding Dong the Wicked Witch of LTCi Rate Hikes is Dead

That Has All Changed!

Impurities

LTCi…Who Cares?

Ron, another great column!

I Love You, Ron Hagelman

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