1. How to Prosper in the New World of Fewer Carriers, Increased Premiums and Stricter Underwriting Harley Gordon 1

2. Agenda…  The new math  The new marketplace  Penetrating the marketplace  Repositioning yourself to succeed  The message 2

3.  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

4. The new math

5.  Carriers were divided into two business models  Public companies: Short-term: Buy market share Price aggressively “Flexible” underwriting Aggressive compensation Re-price opportunistically

6.  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

7.  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

8. The new marketplace…

9.  The market has shifted irrevocably to those With no prior experience The wealthy  Two reasons 1.Those with no prior experience are far more likely to be underwritten 2.The wealthy can afford the premiums which now reflect the risk

10. Penetrating the marketplace

11.  COIs are the key to success  Financial advisors  Attorneys Domestic relations Special needs  CPA’s / accountants

12. Current strategy…

13.  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

14. Position yourself as a long-term care insurance professional and suggest they work with you…

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

16. 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

17. C

18. 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

19.  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

20. Four Steps To Success

21. Step 1: Understand their culture

22.  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

23.  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

24. In effect, they are in the education business

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

26. Consultative Engagement: A selling philosophy consistent with your targeted audience

27.  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

28.  Consultative Engagement is about education  You want to be in the education business

29. Step 3: Have mastery over the subject matter & consequences

30.  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

31.  “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”

32. 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

33. Step 4: Educating the center of influence

34. 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

35. Deploying Consultative Engagement

36.  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

37. Putting theory into action: Expect what they think you will do, …and then do the opposite

38.  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

39. Talking points re: Emotional & Physical Consequences

40.  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

41.  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

42.  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

43. Talking points re: Financial Consequences

44. Paying for care requires a reallocation of income & assets…

45.  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 45

46.  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

47.  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

48. Be prepared deal with objections & misconceptions …

49.  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

50.  $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

51.  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…

52.  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

53. Then educate the COI about what LTCi really does…

54.  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 54

55.  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

56. Summary…

57.  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

58.  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