Presented by Leonard Berthelsen
There has been a fair amount of concern and frustration in recent years among producers and consumers towards long term care insurance and what seemed like never-ending rate increases. The amount of uncertainty related to increased rates are concerning to both existing clients and new prospects.
Rate increases in previously written blocks of business probably will have some additional adjustments in years to come as the carriers grapple with trying to keep those plans above water and still profitable, especially in this low interest rate environment. We certainly want them to pay their claims and fulfill their commitment to their policyholders, so rate adjustments become a necessary evil.
Carriers today now possess more experience with this product which provides an opportunity to better understand the claims process, persistency and mortality which all bode well in the pricing of new plan designs that carriers are implementing. Carriers are concerned with having to raise rates on clients after they purchase the insurance and are looking for ways to mitigate that issue as much as possible.
Some carriers have introduced plans that have small automatic increases in premiums at set intervals throughout the plan’s lifetime. These plans are still competitive and affordable and this design could potentially prevent rate increases later down the line.
Others have brought out plans that have a credit account built into their product that allows the credits, accumulated over time, to be used to offset any rate increase that the carrier may need. Again, this is another attempt to find a way to minimize the need for rate adjustments later on.
Additionally, the hybrid and linked benefit products could be the right product for some clients. If the client is investing money into an annuity, and long term care needs are even a mild concern to them, then having an annuity with long term care benefits might just make sense. Even if long term care issues never present themselves, the annuity value is still there to provide income or a means of funding their legacy. There are linked benefit products that give life insurance and long term care equal footing in the plan. If the long term care benefit is never used then the life insurance is paid out at time of death. If long term care is needed, then the life insurance amount available for payout at death would be reduced. The benefits are paid out one way or another.
Another option carriers are looking at is pricing for high deductible long term care plans. A consumer would select a high deductible ($50,000 -$300,000) plan and the insurance benefits would start after the deductible is met.
We are seeing a different thought process as well as a different mindset from carriers regarding new innovative product designs. They realize that their products have to offer the benefits wanted by today’s consumer at a price that is affordable.
Long term care insurance products are changing but their importance is not. There are many different ways to protect your client and their assets from a long term care issue. The important thing is that you’re having the conversation with your clients about their long term care needs and showing them the many different solutions you can provide.