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Consolidation, Stricter Underwriting Mark LTC Insurance Industry In 03

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No longer in its infancy, long term care insurance remains a dynamic, rapidly shifting industry. Little has remained unchanged in the past year, says Jonathan Black.

From a carrier standpoint theres been a significant amount of consolidation and looking over the books of business and re-evaluating them, says Black, a partner at Curtis-Black Insurance Associates, Danbury, Conn.

Most agents interviewed by National Underwriter said consolidation has been positive for the industry because it makes carriers stronger, which is ultimately better for the consumer. But, some feel widespread consolidation sets a negative precedent.

It can hinder competition, which is necessary for the marketplace, says Anthony C. Stratidis, managing partner, LTC Advantage, Tampa, Fla.

But Stratidis feels that with more than 100 carriers selling an LTC product or products, consolidation is not really an issue. “The bigger issue is whos reinsuring (the merged carriers),” he says. “The more they spread the liability, the less volatility there is.”

Agents in the field have experienced the changes in the industry in the past year in a number of ways.

Stricter guidelines for underwriting are something that Nancy Simm, director of long term care for Highland Capital Brokerage, Avon, Conn., has noticed. This is likely because certain conditions in particular have many claims associated with them, such as stroke and diabetes, she says.

In fact, 20% of the applications Black submitted to carriers were declined this year for health reasons, “which really surprised me,” he says. “Were seeing pricing go up,” too.

But along with increased pricing come extras like riders, Simm says. “A lot of the carriers are debuting their newer product lines that have higher costs associated with them, but they also add a lot of riders and different payment programsconsumer-friendly things but more niche marketed,” she says.

Simm has seen growth this year in employer group discounted plans but not much change among consumers.

Black also feels consumers still dont believe in the necessity of the product.

“There isnt a sense of urgency, despite the fact that states are cutting back on their Medicaid programs,” he says. “I think thats going to have a profound effect in the future. There will be more of a burden on the shoulders of the consumers.” More education is needed to convince the consumer of the need for the product, he adds.

“Its easier to sell to the corporate executive where they see its a tax-deductible expense, but for the average person who right now isnt seeing tax relief for LTC, its a secondary purchase and it shouldnt be,” he says. “There is no question in my mind the need is there.”

The maturation of the LTC insurance industry has accelerated faster this past year than Jesse Slome had expected. The president of Sales Creators, Westlake Village, Calif., says there has been a “gravitation toward more simplified products, such as group or affinity-sponsored products, which will start to make their way into the mainstream individual marketplace.

“Also, theres a very clear delineation within the producer environment,” Slome says. “There are clearly dedicated LTC insurance specialists, and there are incidental producers who offer LTC insurance as part of an overall planning solution for seniors, but the day of recruiting thousands of new dedicated LTC insurance specialists is over.”

This is because there is not enough of a market for thousands of producers, Slome suggests. “You have a core group of between 5,000 and 8,000 dedicated LTC insurance specialists in the country who focus on individuals, and I dont see that growing significantly in the years ahead,” he says.

“Thats not a negative. The good news is, those who specialize in the marketplace are actually going to be far more successful because they wont be experiencing competition, and every marketing organization will be seeking them,” Slome says. “So, those who specialize and produce $50,000 or more in annual premium are going to be highly sought after.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 19, 2003. Copyright 2003 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.