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2002 Saw Some Rough LTC Patches, But It Had Bright Spots, Too

By Peter S. Gelbwaks

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Another year has passed and while much has changed in the long term care insurance industry, much has stayed the same. You could say 2002 was another bad news/good news year.

First, the bad news. LTC insurance carriers are beginning to feel the impact of some of the industrys collective past deeds. For example, some carriers are taking sizable rate increases based on poor actuarial assumptions of morbidity and persistency. And, in some cases, this has been accompanied by shoddy past underwriting, causing significant increases in existing plan rates, along with introduction of new plans having higher rates than their predecessors.

Consumers may very well be smarter than the industry gave them credit for, more fearful, better planners than anticipated, or all of the above. You see, hardly anyone is dropping his or her policy. Whats more, todays increased longevity means people are likely holding their policies longer, and even staying on claim longer, than their carriers may have projected.

In addition, results are emerging concerning carriers that used the “wrong” sellers and attracted the “wrong” buyers.

Simply put, the industrys manufacturers have been adversely selected against by too many agents willing to sell their oldest and sickest clients and finding the carriers na?ve enough to accept this risky block of business. This has shaken the viability, or at least the stability, of a few of the carriers, and a few others have decided to exit because of the lack of profitability or lack of penetration or both (they usually go hand in hand). Also this year, a national television “expos?” show skewered claims practices of one company, albeit from another line of business.

Insurance stocks are depressed (as are most), budgets are being trimmed, and, due to corporate pressures from above, various LTC insurance manufacturing leadership teams are being asked to produce sales and bottom line results that are hardly realistic, given the current environment.

Fortunately, there is good news, as well. For instance, in 2002, the federal government finally “bought in” (at least conceptually) to LTC insurance, by opening up enrollment in the federal governments LTC program to the governments 20 million-person family.

In addition, the “financial sector,” concerned about the shaky economy and stock market, began recommending LTC insurance to most of their clients, a distinct change from former years. Banks, CPA firms, wirehouses, and financial planners all now seem to want to be involved at some level. Consumer and professional groups and associations of all sizes, not wanting to be left out or to ignore the trends, showed more interest in, at the very least, recommending, sponsoring or endorsing the purchase of LTC insurance for their constituencies.

The aging of America has helped the industry gain visibility, too. My age group alone55 to 64–was 24 million strong in 2000 and projections are it will grow by 48% by 2010 to 35 million. In short, the population has aged sufficiently to understand the LTC insurance dilemma.

Meanwhile, the industry has listened and learned about what it takes to appeal to the right sellers and right buyers of this product. It has developed state-of-the-art products and strategies that make sense for the long range. Many of the newer products are structured to appeal to wealthier, younger, and smarter couples who are ready to plan to protect their assets for the long term, for people who take care of themselves and each other, and who have a strong desire to stay independent as long as they can.

Along with all of this, the industry has stepped up its message that the American public can benefit from the services of seasoned and trained LTC insurance professionals. The attention the industry has given to LTC training and education has therefore continued to grow, as have the number of education programs, designation programs, training services, and even e-LTC courses.

Going forward, the industry will likely continue to see a “shaking out” of more carriers and probably more rate increases on past blocks of business. No one can predict when, how or to what extent this will happen. But such downdrafts will probably not be the end of the story. As the year 2002 has shown, the LTC industry has plenty of strengths, and these can–and will–help the industry deal with any trouble spots that crop up, and it has a growing population of aging baby boomers who need the LTC products the industry has to sell.

In my view, the LTC insurance industry has just gone through its infancy and adolescence. Now, it is ready to move into its young adult years, settle down and get married to partners who understand and appreciate what theyve got.

Peter S. Gelbwaks, CTLC, is president of Gelbwaks Insurance Services Inc., Plantation, Fla. His e-mail address is: [email protected]. This article first appeared in the Dec. 2002 edition of LTC e-Wire, an online publication of National Underwriter Life & Health Edition.

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 30, 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.