Ways to Maximize Participation MULTI-LIFE BOOT CAMP KANSAS CITY, MISSOURI

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1 Ways to Maximize Participation Dennis Healy Director of Sales John Hancock Group Long Term Care Insurance Jeremy Pincus Principal The Forbes Consulting Group MLBC PRES1 05/05 Long Term Care Insurance 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 02117

2 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 Long Term Care Insurance 2

3 Qualifying Prospects Dennis Healy Director of Sales John Hancock Group Long Term Care Insurance Long Term Care Insurance

4 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 Long Term Care Insurance 4

5 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 $50,000 annual salary Geographic Distribution Are they centralized enough to effectively conduct meetings Long Term Care Insurance 5

6 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 Long Term Care Insurance 6

7 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 Long Term Care Insurance 7

8 Average Annual Premium by Industry 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 Long Term Care Insurance 8

9 Qualifying Prospects Case Size Large - May mean lower enrollment Small - Less margin for error Communications and Enrollment Process Web access, supported by 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 Long Term Care Insurance 9

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11 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 Long Term Care Insurance 11

12 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 Long Term Care Insurance 12

13 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 rates and plan? 9. Are the demographics strong? Long Term Care Insurance 13

14 Pre-Solicited Groups Replacing Carrier Options 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 Long Term Care Insurance 14

15 Pre-Solicited Groups Replacing Carrier Options 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 Long Term Care Insurance 15

16 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 Long Term Care Insurance 16

17 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! Long Term Care Insurance 17

18 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 Long Term Care Insurance 18

19 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 to move Better to solicit on a moving forward basis and hope to grow over time Long Term Care Insurance 19

20 Case Study 3: 1,500 University With Group Plan Since 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 Long Term Care Insurance 20

21 Case Study 3: 1,500 University With Group Plan Since 1991, Upgraded in 2001 Not an opportunity Not motivated to move for rates Too small to solicit on a moving forward basis Long Term Care Insurance 21

22 Industry Overview Jeremy Pincus Principal The Forbes Consulting Group Long Term Care Insurance

23 Analysis of GLTC Enrollments Key Business Questions Should we quote on ABC company? If we write the case, how can we maximize participation? Long Term Care Insurance 23

24 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 Long Term Care Insurance 24

25 Findings Knowable Factors Firmographics Demographics Controllable Factors Plan design & pricing Marketing & enrollment process Long Term Care Insurance 25

26 Firmographics High, medium, and low performance groups emerge!! Law Shipping Govt Chemical University Energy Financial Services Advt/Mktg Retail Manufacturing Aerospace/Defense Publishing Biotech Tech Telecom Healthcare Education 3% 3%5% 3% 5% 6%7% 5% 5% 5% 5% 7% 8% 8% 9%9% 15% 0% 5% 10% 15% 20% Companies in the West, Southwest, Midwest lead in participation; the Northeast lags 20% 15% 10% 5% 0% 19% Participation by State 12% 11% 10%10% 9% 8% 7% 7% 7% 7% 7% 6% 6% 5% 5% 5% 5% TX WI DC IL NC NV UT CA WA MO VA MI MA MD NY DE PA CT 15% 10% 5% Complete reversal of the 1990 s trend! Smallest companies now show strongest participation rate; same as 401(k) market 9.9% Number of Employees 6.5% 6.9% 5.7% 5.2% 4.6% 0% Lowest to Long Term Care Insurance 26

27 Demographics Participation peaks at average salaries in the $60,000s! Beware very low and very high average salaries 10% Average Salary Participation peaks at 60% over 40 % Over Age 40 10% 8.1% 6.2% 6.5% 6.3% 6.3% 5.6% 5% 5% 4.4% 2.6% 8.6% 5.1% 0% $13,000- $39,999 $40,000- $49,999 $50,000- $59,999 $60,000- $69,999 $70,000+ 0% 23-39% 40-49% 50-59% 60-69% 70%+ Participation falls off cliff below 40%! Modest improvement beyond 40% 10% % Female 5% 4.7% 6.3% 6.8% 6.9% Participation is higher among companies with supp. life participation over 40% 10% 5% Participation in Supplemental Life 6.0% 7.7% 0% 0-39% 40-49% 50-59% 60% to Highest 0% Long Term Care Insurance Less than 40% 40%+ 27

28 Bottom Line: Which Knowable Factors Matter Most? Multiple regression identified a 3-factor predictive model: Variables in the equation Average salary Average age % Female Pct of variance explained 41% 35% 24% Statistically significant!!! Long Term Care Insurance 28

29 10% 5% Number of Choices 8.1% Number of Plan Choices 6.5% 5.4% 3.2% Dramatic decline in participation with increasing number of choices 0% Optional ROP shows the detrimental effects of additional choices 10% 5% 7.4% Return of Premium 6.8% 1.6% 0% Not Available Built in Optional Long Term Care Insurance 29

30 Plan Design 10% Availability of Low-Cost Option Number of Plan Choices 5% 7.2% 4.9% The availability of a lowcost option drives higher participation 0% Facilities only option Comprehensive only When offered as an option, longest LMB consistently gets 60% to 80% of enrollment 10% 5% 0% Lifetime Maximum Benefit Long Term Care Insurance 30 7% More than 5 yrs 6% 5 yrs or less

31 ABI vs. FPO 15% 10% 5% 0% Number of Plan Choices 11.1% Not offered ABI 6.2% Offered as an option The Bad News: ABI is a necessary option, BUT it s expensive, complex, and raises doubts re: the value of FPO plans The Good News: The offer of ABI hurts Availability of Low-Cost Option participation, BUT it generates significantly higher case premium Average Case Premium w/out ABI = Average Case Premium with ABI = $675 $975 Long Term Care Insurance 31

32 10% 5% 0% Enrollment Factors 7.7% Level of Employer Support 7.2% 3.9% 5.3% High Moderate Low Unknown An unsupportive By Payroll Deduction for Employees employer is an enrollment killer At least moderate support is essential It takes 8+ direct communications to build awareness, educate, and persuade employees to enroll in GLTC 15% 10% 5% 4.4% 4.9% Number of Impressions 7.5% 10.6% 0% 2-4 Impressions 5-7 Impressions 8-10 Impressions 11+ Impressions Long Term Care Insurance 32

33 Timing 15% 10% 5% 0% 7.9% 5.6% 3.9% Off-cycle late Off-cycle early On-cycle Best Timing: Immediately By Payroll Deduction for Employees before main benefits enrollment period Worst Timing: Immediately after main enrollment period 50% September appears to be a particularly good month to enroll GLTC 40% 30% 20% 10% 14.3% 20.0% 33.3% 10.0% 0% Q1 Q2 Q3 Q4 Long Term Care Insurance 33

34 Bottom Line: Which Controllable Factors Matter Most? Multiple regression identified a 5-factor predictive model: Variables in the equation Moderate-to-High employer support Communication expenditure per employee Presence of low-cost plan option Fewer separate choices required to enroll Holding enrollment period off-cycle (not in Q4) Pct of variance explained 23% 21% 19% 19% 17% Statistically significant!!!!! Long Term Care Insurance 34

35 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, and purchase 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 Long Term Care Insurance 35

36 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 key segments 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 a truer measure of performance Use knowledge of segments to develop integrated message, plan design, & premium threshold Long Term Care Insurance 36