The insurance industry is at ground zero in a perfect storm

The perfect storm is often dismissed as a unique meteorological event where multiple, powerful negative storms collide in time and space. The term itself, however, has grown in popularity to help define, according to Google AI, “any event where a combination of circumstances will activate a situation drastically beyond the individual elements or parts.”

The insurance industry will be at ground zero as massive and as yet uncontrollable storm fronts collide. We have all been trying our best to ameliorate these risks every day in our individualized planning efforts. 

The strength of a hurricane is determined by the mass of warm water energy available as it approaches land. The predictable advance of the massive baby boomer “great wealth transfer” is a storm that has been brewing for the last 20 years and will provide a financial downpour lasting the next 20. Multiple estimates suggest the movement of inheritance dollars in excess of $80 trillion with 1 in 3 Americans receiving substantial asset transfers falling across the subsequent generations. 

Virtually everyone will get wet; it is only a matter of degree. Generation X, millennials and Generation Z know the money is coming. How could you not be aware or strategically anticipate the wealthiest generation in history? For financial professionals, there has never been a better time to prepare. Planning for boomer largesse is our future.

Mortality will create another storm

The storm coming ashore will clash head-on with another massive stationary front created by the same statistical realities. The massive financial rain coming is triggered by mortality. The stationary front waiting in anticipation is pure morbidity.

We have done what we could to protect the security of those inheritance dollars. The problem, of course, is that those boomer reserves remain vulnerable to large long-term care expenses, which pose a potentially significant depletion of those assets.

As our beloved boomers begin to turn 80, we can anticipate with certainty that half crossing that threshold will need substantial expensive care. The risk is more than real; it’s truly ominous. It’s basically a 50/50 gamble, with an average calamity claim cost approaching a quarter of a million dollars.

What we will all experience is a clash of titans. The historical great wealth transfer will meet its natural and equally massive precursor: the boomer claim tsunami. It will not be a net sum event. The parameters and priorities of your practice will be defined by the necessity of risk leveraging mandated by the generational reassessment of both storms.

What does all this mean?

New sales opportunities will be exponential across multiple generations. Considerations of past client responsibilities, current needs for risk transitions, future investments and retirement security firewall construction should be top of mind. 

This brand-new world of risk management opportunities should begin from the absolute best starting point. It should be the one common denominator that reaches all your clients — one where the immediate risk is greatest and now best understood by all current and subsequent generations. Two questions cover the generational shoreline.

1. Dear wise boomer client: “How is your existing long-term care plan progressing?” Call when you need me!

2. Dear loved subsequent-generation family member: “What is your LTC plan?”

As LTC claims begin to arrive, often suddenly, what is the status of existing LTC insurance funding options? What is your legacy fiduciary responsibility? It is estimated that more than $16 billion in claims will be paid this year from current policyholders. We have 7 million policyholders anticipating judicial claim payments.

As the frequency of claims increases, clients will call you first, rarely the company, looking for assistance with claim management. These are complicated and often initially frustrating benefit approval journeys. An experienced senior care agency can help insurance professionals advise on care options and provide direct claim assistance. They stand ready to provide quality care at home and then remain directly involved in quality care issues while on claim.

As this historic storm passes over, clients will ask: Was there compassion and helpful concern from my advisor before, during and after the deluge? Helping multiple generations be prepared is the only accurate rain gauge.

Ronald R. Hagelman Jr., CLTC, CSA, LTCP, is a principal in Hagelman Consulting, a company with extensive background in chronic illness risk management. He consults for Amada Senior Care. Contact him at [email protected].