8:30am 9:00am Breakfast 9:00am 10:00am -- CE 10:00am 10:30am. 1:30pm 2:30pm CE 2:30pm 3:00pm. 3:00pm 3:30pm. 10:30am 10:45am Break 10:45am 11:15am

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1 8:30am 9:00am Breakfast 9:00am 10:00am -- CE 10:00am 10:30am 1:30pm 2:30pm CE 2:30pm 3:00pm 10:30am 10:45am Break 10:45am 11:15am 3:00pm 3:30pm 3:30pm 4:00pm 11:15am 11:45am 11:45am 12:15 4:00pm 4:30pm Lunch

2 Barry Fisher & Susan Blais Player-Managers Sue Root 13 years w/bjfim Paniz Raeisi 6 years w/bjfim Primary Texas Marketers Jolene Mitchell 6 years w/bjfim Primary Case Manager Dolores Marquardt 17 years w/bjfim Debbie Dale 25 year LTCi veteran Stan Israel 25 year LTCi veteran Marketing Bench Strength and Expertise

3 Help agents/financial advisors integrate long-term care insurance into their day-to-day business None of our agents are LTCi specialists Life & health, property/casualty agents and financial planners Because of this we simplify sales ideas and concepts We take innovative concepts and put them into practice Wow factor Business owner carve-outs and multi-life (group) sale NEVER approached LTCi as a senior supplement sale Field underwriting expertise Begins at the beginning Sticklers on suitability Want to help you do what s right for your client Focus is long-term care insurance sales success Nothing happens until a sale is made Tom Watson, NCR & IBM Hit The Ball Out of the Park!

4 Barry J. Fisher, EVP Borden Hamman Insurance Marketing (818)

5 Concerns, concepts & ideas that resonate with consumers Power phrases that work! Recent industry data that leads to the question have we been selling too much to too few? Who s buying and how can we do better? Where do we go with today s pricing? How much LTCi is really used at claims time? Is 5% compound inflation an oversell? New Think for long-term care planning Different ways to think about the risks and solutions Simplified products and sales tools Price-Point marketing solutions Technology shortcuts for marketing and sales

6 Chronic Illness (not medical acute -- in nature) Generally accepted definition (insuring clause) -- HIPAA The inability to perform 2 of 6 of the activities of daily living Eating, bathing, dressing, toileting, transferring, continence Suffering from a severe cognitive impairment Alzheimer s disease/dementia Long-term care risk management means providing liquidity to pay for the costs of services that an individual needs when they can no longer care for themselves High probability event as one gets older The older you get the older you get! Incidences at younger ages particularly due to catastrophic accidents Costs for high quality full time care in facility or home are now pushing $60,000+ per year in Texas

7 Marc Faber, PhD Economics Gloom, Boom, Doom Financial Newsletter Money on deposit experiences negative interest rates in real terms Low interest rates adjusted for cost-of-living increases Driven by the Federal Reserve s artificially low interest rates Promised government retiree benefits unlikely (in real terms) due to rapid growth in 65+ population Look at European demographics (birth rates) State & private pension funds are seriously underfunded In 2011 the underfunded levels of S & P 500 companies defined pensions reached and epic $354.7 billion Total unfunded liabilities for private & public estimated between $1 and $2 trillion

8 Many have not recovered from recession Plan to work in some manner five more years Age 64 Vs. Age 69 Expect less government help Financial peace of mind 6x more important than accumulating wealth Protecting assets is 5x more important than higher returns 49% expect to provide financial help to families Top longevity worries 73% -- Serious health problems 59% -- Being a burden on family 49% -- Running out of money to live comfortably

9 People are over five times more worried about being a burden on their family than dying Uninsured medical expenses are the top financial worry among men and women age 55+ Almost two-thirds of people will actually need some long term care, such as home care, assisted living, or nursing home care, after they reach age 65, but only 35% of people believe they will need such care People rank Alzheimer's as their single greatest fear among disabling diseases in later life People greatly underestimate the financial, social, and lifestyle impact of caregiving responsibilities When someone needs long term care, a wide circle of primary caregivers, secondary caregivers, other family, friends, and community members often provide the care and are impacted by the responsibilities When asked what is most worrisome about being burdens on their family, people told us they are most concerned about protecting their families from the financial pressures of providing for their long term care.

10 People seek financial solutions that won t lose value and can help their money go the distance The ideal retirement investments or insurance 65% -- Guaranteed not to lose value 60% -- Protects income from market loss 60% -- Covers the cost of long-term care The ideal financial advisor 77% -- Speaks in terms client understands 75% -- Listens and understands what s important to client 72% -- Protects client from major risk Planners Vs. Deniers (my terms) Ageless Explorers Cautiously Contents Lives for Todays Worried Strugglers THEY WON T BUY IF YOU DON T ASK!

11 Savings & investments How much does someone have to earn to put $1 in? Federal & State Income Tax (can be 40%+) Payroll and other extraneous taxes How much does it cost to get the money out? Depends on sort of investment Erosion of assets due to inflation (Faber) Maybe investments didn t work out or timing is bad Loss of income (cash flow) when assets are liquidated Qualified Funds No income tax in means income tax coming out possibly at higher rates Real Estate How easy is it to sell, refinance or leverage during tough economic times?

12 People with assets (High Net Worth Individuals) How liquid will they be when they need care? Real property Value in their business Qualified plans IRA s, 401(k), pensions, etc. Savings & investments Generally ages 50 to 65 and in reasonably good health Average age of issue for traditional LTCi = 56 Average age of issue for linked (life/annuity hybrids) = 66 Planners not Deniers Value comprehensive coverage, tax-free benefits and understand the value proposition of long-term care insurance because someone explained it $3,000 to $5,000 per person premium won t change lifestyle

13 SHRINKAGE Due To Bad Markets Taxes Loss of Income

14 100% of every policy benefit dollar goes to pay for the cost of services There s NO SHRINKAGE! Premiums paid in today s dollars, (as opposed to asset liquidation tomorrow), purchase 100% dollars often indexed in some fashion for inflation Tax-Free long-term care benefits mean: Well spouse s lifestyle won t be economically impacted by a caregiving event Family members can focus on care as opposed to making diminishing ends meet Family members can keep their day job Estate planning goals can be achieved

15 Individual tax deductibility is limited to non-existent Owners of Health Savings Accounts can use pre-tax dollars to pay some or all of their QLTCi premiums Subject to penalties if you exceed age banded limits Owners of S-Corp, LLCs, Sole Proprietors, Partnerships can or will deduct QLTCi premiums as A & H insurance NOT subject to the 10% AGI rule Subject age banded limits or risk tolerance of CPA/client Stockholder-employees of C-Corp deduct 100% of QLTCi premiums Carve-out on rational class based on employment status QLTCi premium paid for employee are 100% deductible Benefits are always tax free

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17 Have you taken care of your long-term care planning yet?

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19 We ve done a good job with the affluent 15% of population with $1,000,000 + assets LIMRA 2012 per person average premium = $2,400 BJFIM agency average =$3,500 What about the rest of the folks? 15% are impoverished 10% are working poor People fall into the social safety net This leaves us with the Mass Middle 60% of the population with the most at risk Very little set aside for medical or chronic illness needs Some fall into the social safety net when life doesn t go well Two segments to this market Upper middle and the mass middle market

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21 How much long-term care insurance do insureds REALLY utilize? What is the duration of various long-term care insurance claims? What part should someone s retirement income play in paying for the cost of care? Does it make sense to insure for claims at the lower end of the continuum of care. What is the economic insurable risk? Do policies with rich home care and assisted living benefits skew utilization?

22 Are we selling to the predominant risk? Does consumer fear of a catastrophic cognitive event (the 10 year Alzheimer s claim) cause them to buy more benefits than is necessary? Does an agent s personal experience plus their desire to help their clients lead them to present benefit plans beyond a reasonable need? By selling to this catastrophic claim, are we losing consumers who would benefit greatly by a one or two-year LTCi benefit plan?

23 2005 Milliman Actuarial claims study showed that 98% of claims closed in five years or less 2011 Milliman Actuarial/Society of Actuaries study Report showed that in a review of over 76,000 claims Only 14.1% of insureds maxed out their benefits Of those with six- to 12-year benefit plans only 4.5% used all their benefits The same study indicated that of all benefit periods, only 40.1% of all available maximum benefits were paid out Leads me to believe that we ve been selling too much to too few

24 Genworth Reimbursement Claims Claim Duration 42% of claims last less than one year due to: short recoverable illness sudden terminal illness Single use of non-caregiving benefits (equip, training, etc) Type of Care < 1 year > 1 year Home Health Care 84% 48% Nursing Home 10% 23% Assisted Living 6% 29% The average length of claims that last more than a year is 3.9 years Diagnosis < 1 year > 1 year Of the claims that lasted more than 3.9 years the average length of claim was 6 years. 15% of claims will last more than 5 years Musculoskeletal 27% 14% Cancer 31% 5% Cardiovascular 14% 16% Dementia 12% 47% Respiratory 5% 5% Brain/CNS 5% 10% *Genworth Financial, Long Term Care Claims Experience Data December 1974 through December 31, 2012 For Producer Use Only. Not for Public Use or Distribution. 24

25 For most care provided the answer is currently YES With caveats ( Five year averages Genworth 2013 Cost-of-Care Study Home care -- 85% of long-term care services 1% nationally & 1% to 2% in Texas Assisted living 7% to 8% of long-term care services 4% nationally and 6% in Texas How much of this is related to actual cost-of-care services Nursing facility Balance of care provided 4% to 5% nationally and 2% to 3% in Texas How much of this is short term stays paid by Medicare or Medicaid? Does the social safety net skew cost inflation?

26 Inflation has been relatively low for the past five years Demand for services is likely to increase in relationship to supply New (unknown) care options will compete in the marketplace to reduce costs Government policy will positively or negatively impact in unknowable ways

27 5% compound inflation protection will continue to be the gold standard Don t let the perfect be the enemy of the good! Consider the alternatives: 3% and 4% compound and simple inflation Consumer Price Inflation Combo inflation Future purchase options Combine with: Larger immediate pool of money Shared care options Don t try to solve the problem all at once Sell to the client s price point

28 The need has not disappeared Not planning is not an option The ways we plan for the need must adapt Start the conversation earlier mid-40 s Approach on an incremental basis for most No longer we re going to sell you one policy to solve problem Do better job of understanding claims avoid oversell Understand/utilize alternate forms of inflation protection Discuss client s budget and which part of the risk they re willing to self-insure What are we really covering? Care costs or living costs? Consider and combine various funding mechanisms Traditional and linked over someone s life time Using more technology provide by carriers and BH

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30 $300/month per person ($600/month per couple) Affluent market will continue to purchase rich benefits Business owners will use leverage of premium deductibility $200/month per person ($400/month per couple) Upper mid-market consumer Willing to self-insure a larger portion of the risk $100/month per person ($200/month per couple) Mass mid-market consumer Client in 40 s that wants to start the planning process Accessible through the worksite

31 Future value of the policy when care is needed based on inflation option chosen Can the client invest or save their way out of the problem? Value of tax-free benefits

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33 LTCi Pool of Money Illustration Software Borden Hamman Marketing Platform Consumer Term Life Quote Engine Full-Monty of life, annuity and LTCi products Loyalty Rewards Points (double dip opportunities) Bonus Compensation Program

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