Carriers are slowly figuring out how to price and package long-term care insurance in a way that meets the needs of a growing consumer base.
And the evolution of LTCi is a significant development in an industry eager to serve 76.4 million potential baby boomer clients.
“This is a great time to be in long-term care, even though it’s perceived that sales are at the lowest level they’ve ever been,” said Steve Schoonveld, head of linked benefit product solutions for Lincoln Financial Group.
“That’s simply not true,” he said of the LTCi sales perceptions.
Schoonveld is part of an afternoon panel discussing LTCi trends today at LIMRA’s 2016 Life Insurance Conference in Las Vegas. He will be joined by executives from Milliman and the American Council of Life Insurers.
Schoonveld and the ACLI have worked with the Bipartisan Policy Center to study how access to LTCi can improve health care for elderly Americans.
A February BPC report noted that personal savings and government programs alone cannot meet the public demand for long-term care financing.
“The high and rising cost for long-term care services threatens the financial and retirement security of millions of Americans,” said American Council of Life Insurers President and CEO Dirk Kempthorne.
Tens of thousands of Americans bought LTCi years before they would ever need it. LTCi sales boomed during the 1990s, but the pricing models were flawed. As a result, many clients are seeing unexpected price hikes.
During a March hearing before the Pennsylvania Insurance Department, Genworth president and CEO Thomas McInerney testified that policies issued between 1974 and the early 2000s have become "unprofitable." He said Genworth lost more than $2 billion on them between 2009 and 2014, and expects to lose millions more annually for several more years.
The rough ride led to the perception that LTCi is a losing business proposition. But facts and projections do not support that view, Schoonveld said.
“Price and volatility happen in every product out there -- whether it’s auto insurance, whether it’s annuities or whether it’s life insurance,” he explained. “The assumptions change, the markets change, it’s going to happen.”
Carriers are adapting to the market and solutions that work by combining life and long-term care into combination products. Impending sales statistics will show these so-called “life combo” policies have more than doubled from 2015 to 2016.
The key sales point is the client receives a benefit – either LTC or a death benefit, or a return-of-premium – 100 percent of the time, Schoonveld said.
“You pay your premiums and there will never be a rate increase,” he added. “That’s what we know clients want. Clients want guarantees on their solutions, whether in their phone or in their long-term care insurance product.”
Opportunities for Annuities
Annuities also can play a role in crafting long-term care policies to meet specific needs, while offering guarantees in the form of riders.
“There are some interesting things you can do with annuities,” Schoonveld said. “I see the opportunity there in the annuity space, especially when you’ve got some orphan annuities, or some funds sitting in an annuity, to exchange those policies without tax consequences.”
Whether it involves life combos, annuities or straight LTCi policies, carriers will likely end up as key players in any future public-private program to provide LTCi to Americans.
Schoonveld has been a part of ongoing discussions about what that program might look like. The key is to avoid looking at LTCi in a vacuum, he said.
“You cannot look at one piece of the retirement pie and think that it’s not going to impact the other pieces,” he said.
Any public-private venture needs to recognize the variety of needs consumers have as they face retirement, Schoonveld explained. Part of the Affordable Care Act, the Community Living Assistance Services and Supports Act (CLASS), was to provide a LTC benefit.
But CLASS was repealed in 2011 because it failed to incorporate a variety of potential solutions for LTC, Schoonveld said. One of those potential solutions was the private market option.
“There’s nothing like the private market to provide that robust set of solutions to meet those needs,” he said.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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