...as to why people do not buy long-term care insurance.
Their research was inspired by the fact that approximately 70% of people will need long-term care, and yet most people refuse to buy insurance to cover it.
This discrepancy is often dismissed as people simply being unwilling to pay the notoriously expensive premiums or mistakenly thinking that they will receive government assistance, should they ever need long-term care. However, Mitchell and Gottlieb’s research revealed a more troubling explanation.
What they found is that consumers are assessing long-term care insurance in the wrong way. People believe that paying for long-term care insurance is not worth it, because they may never use it. To them, it is an investment that they may never see a return on if they never actually need long-term care. They fail to recognize that paying for this type of insurance is a way to protect themselves in the future from debilitating out-of-pocket payments.
When it comes to making complex decisions, like deciding whether or not to buy long-term car insurance, people often exclude certain important factors in their thought process. Mitchell and Gottlieb define these people as “narrow framers”.
The goal of their study was to classify people based on how likely they were to be narrow framers and then assess whether being a narrow framer had any correlation to the amount of long-term care insurance they had.
In order to do this, the researchers examined a subset of 1,900 respondents from the Health and Retirement Study, which is a nationally representative survey of Americans over 50 years old. Using this data, they were able to evaluate how likely a person was to be a narrow framer and see if these people had long-term care or not.
What they found was that, compared to the average person, narrow framers were half as likely to have long-term care insurance. This correlation exists irrespective of a person’s health status, risk aversion tendencies, marital status or wealth. Meaning that the fact that these people are narrow framers is the most predominant common denominator to indicate how likely they are to have long-term care insurance.
While this is a problem for providers that sell these types of plans, the authors believe that they could help themselves if they did a better job of marketing their product.
If insurance companies gave consumers more information about the likelihood of needing long-term care and what it would cost them without insurance, then they would be more likely to want to protect themselves. Also, marketing their products that have additional benefits, aside from long-term care, might sway people who think just long-term care is impractical because they may never use it.
Another strategy could be to market products to adult children, whose parents may need the care and who are more willing to weigh the benefits having insurance has over the risk of not having it.
Narrow framing is a deep-seated mind-set that poses a problem for providers trying to sell long-term care products, but are still successful marketing strategies that agencies can adopt to over come this issue.