Survey finds Medigap policies persist, on books for 9 years or more

No one seems to get as excited about supplemental Medicare insurance as former NY Jets quarterback Joe Namath, whose commercials flood the airwaves with over-the-top exhortations about the benefits of Medicare Advantage options.

“Make sure you’re not missing out! Get what you deserve!” Broadway Joe yells with wide hand gestures. “Call now!”

But as ubiquitous and perhaps annoying as the ads are, surveys show they work. Agents say that clients are contacting them directly as a result of seeing Medicare Advantage TV ads offering no-premium coverage or included ancillary benefits.

Ads generate calls to agents

“The TV ads are definitely generating client calls to agents,” said Jesse Slome, executive director of the American Association for Medicare Supplement Insurance. “They’d better be prepared to deal with these especially with open enrollment approaching.”

The association just published a study that concluded persistence, especially when it comes to those TV ads and other marketing techniques, really pay off for supplemental Medicare insurance providers. The majority of agents surveyed in the report said that Medigap policies they’ve sold remain on the books for nine or more years. Some 41% said policies remain active for between five and seven years. Persistency like that leads to profitability for insurers and for agents one sale can yield years of commission revenues.

“I did not expect persistency of nine or more years,” said Slome. “Over the years, data from Medigap call center operations have generally placed average Medigap persistency at around five years. The sizable difference could be attributable to the added value of face-to-face contact or merely that participating agents based their replies on their general sense rather than analytical data.”

Only 6% reported policies remain on the books for between 3 and 4 years.

“Keep in mind that this is anecdotal information,” the report said. “It also reflects just a moment in time. However, it clearly shows that most people are satisfied with the Medigap plan choice.”

Policy options reviewed

Half of the agents shared they reviewed Medigap policy options with current clients on an annual basis. Several commented they did this because competition made higher levels of customer service vital. Only 1% noted they rarely or never initiated a review with current clients.

Switching to a lower cost Medigap plan option is the reason given for 42% of agents reporting clients decided to switch coverage. However, dropping Medigap for Medicare Advantage was closely behind with 41%. The results indicate switching occurs as a result of increasing premiums or the desire to switch to higher deductible options.

The majority of survey participants said they have been selling Medigap plans for 10 or more years.

“Medicare Supplement plans continue to offer features that are particularly attractive to a certain demographic of seniors (as compared to Medicare Advantage),” Slome said. “And second, MA plans have significant presence in populated areas. But few, if any choices are available in more rural areas of the country where Medigap sells particularly well.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].