Reinsurers can help reposition long term care insurance
Long term care insurers have a challenging yet potentially rewarding task ahead of them: improving public perception of long term care insurance while at the same time growing the business to its potential.
Reinsurers can help LTC carriers meet that challenge with new ideas based on solid data they have collected. In order to shape the long term care market going forward, it is necessary to understand the development of LTCI over the last decade.
While LTCI is relatively new in the insurance product life cycle, it is also a product facing a broad array of challenges in its relative youth:
==Actuarial pricing assumptions (e.g., lapse rates and claims estimates) that were incorrect and caused several carriers to increase premium rates significantly;
==Some questionable sales and marketing tactics in the past; and,
==Scores of insurers exiting the primary marketplace.
This confluence of events also unfortunately has resulted in negative publicity for LTCI. It’s hard to forget the memorable quote of Benjamin Lipson, an independent insurance broker and LTCI author, regarding the sales and marketing tactics of long term care insurers: “You’d get better odds at a gambling casino than with LTC insurance companies,” he writes in “Choosing The Right Long-Term Care Insurance.” LTC insurers would take issue with this view, but it still underscores the maxim that perception is reality.
While the perception may be undeserved, it is evident that the mentioned challenges are real.
So, how can a product routinely portrayed negatively in the media, in part because of its own sins, create for itself a positive perception, and grow?
There are some very positive trends to suggest that LTC insurers already are taking steps to turn that perception around.
In an effort to shore up actuarial assumptions on new business, LTC insurers have addressed lapse rates and claims estimates, tightened underwriting standards and increased pricing significantly. Carriers with in-force blocks of LTCI business are recognizing past pricing problems and are working diligently to rehabilitate those blocks.
The recent investment income environment also has resulted in responsible pricing, a welcome reprieve from the pricing patterns, which many in the LTC industry viewed as irrational. And as stability returns to the LTCI market, so, too, do new players.