ways to maximize participation - aaltcico pres1 02/05 qualifying prospects Ł demographics Œ...
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
Long Term Care InsuranceLong Term Care Insurance
Qualifying Prospects
Dennis HealyDirector of Sales
John Hancock Group Long Term Care Insurance
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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
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Qualifying Prospects
� 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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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Qualifying Prospects
� 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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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Qualifying Prospects
� 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
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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Qualifying Prospects
� 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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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Qualifying Prospects
� Wild Cards That Can Hurt
� Unstable work environment - layoffs?
� Media influences
� Geographic distribution
� Corporate affinity
� Inappropriate plan design
� Non-ERISA plan
� Administrative considerations
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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
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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?
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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Case Study 1:10,300 University with Group Plan Since 1998
� 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!
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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Case Study 2:5,000 University with Group Plan Since 2002
� Current participation: 5%
� Questioning carrier commitment
� Transfer provision may be available
� Good plan design with strong rates
� Average age: 45
� Average salary: $56,000
� Strong benefit participation
� Centralized location
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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Case Study 2:5,000 University with Group Plan Since 2002
• 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
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Case Study 3: 1,500 University With Group PlanSince 1991, Upgraded in 2002
� Current participation: 9%
� Questioning carrier commitment
� No transfer provision
� Good plan design with strong rates
� Average age: 43
� Average salary: $58,000
� Strong benefit participation
� Centralized location
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
Long Term Care InsuranceLong Term Care Insurance
Industry Overview
Jeremy PincusPrincipal
The Forbes Consulting Group
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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Analysis of GLTC Enrollments
� Key Business Questions
� Should we quote on ABC company?
� If we write the case, how can we maximize
participation?
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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Findings
� Knowable Factors
� Firmographics
� Demographics
� Controllable Factors
� Plan design & pricing
� Marketing & enrollment process
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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:
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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Plan Design
� The availability of a low-cost option drives higherparticipation
� When offered as an option,longest LMB consistentlygets 60% to 80% ofenrollment
Number of Plan Choices
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
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ABI vs. FPO
Number of Plan Choices
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
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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:
MULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURIMULTI-LIFE BOOT CAMP 2005 - KANSAS CITY, MISSOURI
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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
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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