Long Term Care and Disability Insurance

With Experience Comes Knowledge.  Are the LTCi Carriers Getting…

Presented by Leonard Berthelsen We certainly would like to think that knowledge comes from experience and that we are onto a brighter future with long term care insurance.  A recent article on the website LifeHealthPro.com outlines many of the issues affecting LTCi carriers and the impact that it has on policy design and pricing.  The article outlines a recent study that was completed using Society of Actuaries (SOA) data from 2000 through 2011. In that data, of 172,000 claimants of long term care benefits representing $7 billion in claims revealed some important information such as, “that although actual claims for LTCi policies with lifetime benefits may be higher than those for policies with limited benefits, the claims incidence for policies with limited benefit periods is actually higher than the incidence for policies with lifetime benefits.” This shows that the concern for lifetime benefits from the carriers’ perspective may have been too conservative and might open the door to future benefits being available in longer durations.  Another excerpt from the LifeHealthPro article that dealt with substandard issued LTCi policies was, that despite the fact that “the substandard risk category paid more for coverage than policyholders in the standard or premium category, they are less likely to file claims than policyholders in the standard category.”  The conclusion drawn here from the claims data compiled by the SOA is that the carriers pricing again may have been too conservative in relationship to their overall risk for this class of applicants.  Are the carriers using this new found “tool” (claims data)?  In my opinion it appears that at least some of them are.  New generation of LTCi products seem to be designed based on some of the data on claims and benefit utilization, and that is a good thing.  As the carriers better understand the data put into their pricing model, new versions of LTCi will be introduced and the future certainly looks brighter today than 5 years ago.  LTCi products related to linked benefits, life insurance and annuities all have had provisions and riders recently developed to address the long term care event that many of its policyholders will likely face.  As is the case with most industries that have government regulations and oversight, we have to have the regulators onboard with change as well.  Having them recognize the need for improvement in plan design, pricing and overall features will be a big step for an industry wanting to succeed, but also needing to be profitable.  Regulators in recent years have had to wrangle with the issue of carrier rate increases on previously sold LTCi plans.  This is not an easy task for them or for the carriers.  No one likes rate increases and it is certainly never easy explaining this to the policyholder.  Maybe some of this data will help the carriers get it right.  Will we see a resurgence of interest from carriers to enter the LTCi market place that left in previous years, or new carriers that see an opportunity for new growth?  Time will tell, but one thing is for certain, the more knowledge and experience that a carrier and an industry has, the better the products and better the pricing.  It’s funny how the very reason why we sold LTCi is what is giving us the glimmer of hope for a brighter future – CLAIMS!
Long Term Care and Disability Insurance

As a Producer, it Might be a Good Time…

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.