LTC Insurance Premiums: How To Respond To Future Changes

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There is a consensus within the long-term care insurance industry that premium increases must be applied to future product generations.

Since few subjects are of greater interest to LTC agents than this one, it may be helpful to review some of the factors leading to this prediction and also how marketers can adjust their efforts accordingly.

LTC insurance is still a relatively new industry segment. Another 10 years may be needed before sufficient data are available to more accurately determine cost factors. As examples:

Persistency. How does LTC insurance persist? Carriers are beginning to realize that clients are keeping this coverage at persistency rates never before seen with any health insurance product.

This trend doesnt surprise LTC agents. They know that the purchase of LTC insurance is a serious decision, and clients who acquire this coverage understand the wisdom of protecting their nest egg. Further, they know that the importance of such protection actually increases with age.

From a carriers financial viewpoint, however, this trend means that twice as many insureds may maintain coverage into their elder years than was projected. That means twice as many claims may have to be paid, and the money will need to be there.

Assisted Living. More patients are reportedly living in assisted living facilities than in nursing homes. At the beginning of this trend, no one knew how to price for these benefits, because there simply was no experience upon which to draw. Now, the numbers are coming into focus and premiums must be reevaluated.

Regulations/legal actions. The National Association of Insurance Commissioners has proposed model regulations that will make it very difficult for carriers to obtain future premium increases. The message is clear: “Do it right the first time or suffer the consequences.” Recent lawsuits against some carriers enhance this message, whether or not such legal actions are justified or reasonable. These factors certainly emphasize the need to be conservative with LTC insurance pricing.

Younger insureds: The average age of new clients continues to decline. It is nearing 60 and even younger within worksite marketing. The big claims experience may be 25 or more years away. Considering inflation growth, $200 per day may compound to nearly $600 in that time. Together with high persistency, the potential claims impact presents important considerations.

Its not all bad news, however. Going forward, positive factors will affect pricing, as well. The most important of these is the anticipated improvement in morbidity.

There are various reasons why such improvements can be expected. Improvement in healthy lifestyles is one. In addition, some reports indicate a vaccine treatment for Alzheimers and other forms of dementia may be only a few years away, a development that would have an enormous impact on LTC insurance. At some point in the future, we may also see genetic reversal of disease. To some degree, these various improvements may be considered in pricing actions.

Additionally, the LTC industry has now gained enough experience to identify the better classes of LTC risk. Whether such clients are couples, or individuals with certain favorable family health histories or lifestyle habits, we may see more favorable premiums for these applicants.

Perhaps the most important response for LTC agents who are looking to the future is to stay informed and to be flexible in marketing approach. Some considerations to keep in mind include:

1) Affordability. Product recommendations must be truly suitable for the clients long-range budget. While there will always be an upscale market, the concept of “lifetime, zero-day only” may not apply as widely as before. When the need for LTC arrives, our clients will be far better served to have affordable coverage in place than to have been turned away by high premiums.

2) Niches. Opportunities for business expansion will include those prospects identified as the best LTC risks, as mentioned above. Marketing programs can be adjusted accordingly.

3) The Middle Market. A recent study from American Council of Life Insurers, Washington, speaks volumes about the market potential for LTC insurance:

“Over two-thirds of older Americans who need help with activities of daily living rely solely on family and friends. More than 70% of people with Alzheimers disease live at home and receive most of the assistance they need (75%) from unpaid caregivers. To enhance their ability to age in placeaging baby boomers will need to supplement help from family and friends with paid long-term care in the home and community. Long-term care insurance can make these services affordable to middle-income families” (Source: ACLI, “Can Aging Baby Boomers Avoid the Nursing Home”? March, 2000).

Two major trends support increased volume potential for LTC agents: 1) recognition that LTC insurance must be a standard part of retirement planning, and 2) emphasis on “aging in place,” a circumstance that requires extensive home and community services.

In sum, some degree of LTC insurance protection and support, especially from policies with strong home and community benefits offered by strong carriers with a commitment to this market, will be part of the answer for millions of Americans.

is president of American Insurance Marketing Services Inc., a Montgomery, Ala., firm that does national LTC marketing for PFL Life Insurance Company. He may be e-mailed at

jcrawford@aimsltc.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, October 28, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.