Medicare Supplements: What should I be selling?

With so many new Medicare supplements entering into the market, how should I come to a decision on what I should be selling?

Believe it or not, this is a tougher question to answer and has some external factors that must be considered. With the Medicare eligible pie getting bigger for about the next 20+ years, we will likely see more new entrants into the Medicare supplement space. The obvious and easy answer is: it depends on where the rate falls and what the underwriting of a new product looks like. Things like rate increase history can also be important, but unfortunately, it’s not the tell all.

I think we can all recall a surprising rate increase from any number of companies that we didn’t see coming, and the increase that you would likely see would be dependent on the performance of a yet to exist block of business when you’re talking about new carriers. When I’m looking at new products in the market, I look at the rate at different ages. You can tell a lot about where a new carrier is looking to take in their business from. Most Medicare Supplement carriers are not top of the charts at all ages, rather they are really looking to be good at certain ages. Actuaries have figured out over the years what loss ratios will likely be in certain age bands, and many carriers make decisions based on those actuaries of where they want to pull their business from in a market. A great example of this would be the carrier that is top of the charts at 65, it’s a safe argument that they are willing to take a higher loss ratio, but write a larger volume of business gained from the aging in population. In comparison, up against the carrier that is really good at 70, and the argument can be made that they are looking for a healthier block of business from a part of the population that has seen a few rate increases and may be shopping for a lower rate. Their philosophy could be that they will write less in premium maybe than the carrier that is good at 65, but the loss ratio will be lower.

I also pay close attention to the underwriting and think about how particular niches can either help certain potential clients or exclude potential clients. How is the new carrier’s electronic application capabilities compared to what I already have? How easy are underwriters to get to for those specific questions that you’ll always run across? There are a lot of factors that play into whether to pick up the new product in town or let it go, and we’ve all seen some be successful and some not so successful, but one thing to remember is that your trusted, stable company that you write the majority of your business with now was at one time that new kid on the block, and with the ballooning of the Medicare population, there will no doubt be room for additional carriers in the marketplace. One last thing to consider on writing a new Medicare supplement carrier, how diverse is your book?

In my opinion, there is a great argument to be made around not putting all of your eggs in one basket. If an agent has all of their 500 Medicare supplements in one plan, and for any reason that, the plan takes a larger than desirable rate increase, an agent could quickly find himself in a position to have to move or try to move 500 clients, which no one wants to do. By diversifying your portfolio into 3 strong Medicare Supplement products, you would decrease your odds of all three taking a large rate increase, and if one or even two of your three took a larger than expected rate increase, and you have clients upset about it, you’re only moving a third or half the block instead of the whole thing. It will never hurt to give the new kid on the block a good look.

For more information regarding adding new Medicare Supplements to your portfolio and diversifying your book of business, contact a Regional Sales Director at 800-962-4693 for more information.

-Answered by Matt Goheen, Regional Vice President