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Life Health > Life Insurance

LTC Insurance Begins Slow Climb Back From Doldrums

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Authorities in the long term care insurance industry think the finally see a lasting turnaround from the stagnation that has affected the industry for the past several years. Overall, LTC insurance is poised for modest growth, while some leading carriers have shown double-digit sales increases.

LTC in general is becoming a bigger part of the national consciousness as Federal and state programs have increased public awareness of the need for individuals and families to take steps to protect against possible future LTC needs, experts note.

Overall, LIMRA International predicts slow growth for LTC insurance in the near future.

“Although LTC insurers have many reasons to remain enthusiastic about the product’s potential, they must be patient and think long term, as it will take years to realize the benefits of recent initiatives,” says Jennifer Douglas, analyst, LTC and developmental research for LIMRA, Windsor, Conn.

State LTC Partnership plans, along with tightened Medicaid eligibility requirements for those needing LTC and the promise of more favorable tax treatment for linked-benefit products, which offer LTC benefits as riders to a life or annuity policy, are all helping raise awareness, Douglas believes.

“In addition, there’s an industry-wide effort to create more positive messaging around the product and industry,” she says. “Some carriers are also encouraged by the introduction of newer products aimed at the middle market.”

One answer is for carriers to convince more producers to sell LTC insurance and to get more production from agents and brokers already selling it, LIMRA research suggests.

New products that offer reduced levels of benefits could work against the industry by giving “another excuse for consumers to not buy and producers to not sell LTC insurance,” Douglas says.

Still, she thinks the industry must continue to develop new LTC products. “From a product-development perspective, maintaining focus on the claimants’ needs will better serve the industry than adding sizzle,” she says.

Buck Stinson president of Genworth Financial Inc.’s LTC insurance division, notes industry sales rose 2% in the third quarter and probably will be up 3% to 4% for the year as a whole.

Next year, the industry should see “low single-digit sales growth, and that’s encouraging,” he says. Another sign the industry is stabilizing: “We haven’t seen any major exits from the market, which is refreshing.”

Genworth’s own LTC sales were up 11% through the third quarter. Although its individual LTC sales were flat, sales of linked-benefit products were well up this year, along with group and multilife sales.

Linked-benefit products should do especially well from the end of 2009 and into 2010 as tax benefits kick in from recently enacted pension reform legislation, Stinson predicts.

“What we’re finding is half of advisors selling individual polices are selling linked benefit as well,” Stinson reports.

Stinson also expects a “lot of traction” from his company’s recent endorsement by the AARP, Washington. In July, the AARP announced it was switching its LTC insurance offerings from MetLife Inc., New York, to Genworth. With its 38 million members, AARP offers a major opportunity, Stinson notes. Genworth projects $150 million in LTC insurance sales over the next 5 years from the AARP agreement.

Genworth also launched a new LTC policy designed to respond to consumer demands for less costly products. “Affordability is the number one concern for consumers,” he says.

Genworth introduced the product, Cornerstone Advantage, to the independent producer channel in the third quarter and plans to offer to AARP members as well.

Among other features, Cornerstone offers an 20% deductible for LTC expenses, dropping the premium by 50% to about $1,000 a year compared to typical Genworth policies.

“The trend will not be one size fits all of a single product. There will be multiple individual solutions,” he says. One of the reasons Genworth broadened its product portfolio is it believes the market is “under penetrated,” Stinson says. “

He reports the company has seen little or no negative fallout from its recent application for rate increases, ranging from 8% to 12%, on its older lines of LTC business. It applied for increases in 48 states and so far 12 have approved its entire request, he reports.

Thomas Riekse Jr., managing principal at LTCI Partners LLC, Libertyville, Ill., calls Genworth’s rate increase a “non-event,” adding, “We have quite a bit of [Genworth's] business on our books and didn’t see a big blowback from that.”

Along with other experts in the industry, Riekse believes the budding state Partnership program, enabled by the Deficit Reduction Act of 2005, has contributed a great deal to the rise in sales.

Qualified Partnership policies help consumers protect at least part of their financial assets against claims by Medicaid in the event they ultimately exhaust their private LTC coverage.

“We found a lot of opportunities and options for producers” in selling Partnership policies, Riekse says. “Getting the necessary training is a short-term pain but a long-term gain, because now you are going to have a new set of people selling long term care policies.”

Riekse’s brokerage has seen strong sales increases, particularly in the second half of this year. He credits much of that to referrals from banks, broker dealers, financial planners, accountants and other professionals.

A New York Times story that appeared in March alleged that many valid claims for long term care had been denied by carriers. That article and Congressional reaction to it put the industry on the defensive for a few months, Riekse notes. All in all, however, he thinks the article may have been beneficial.

“I think people found that this was more of a company-specific problem than an industry issue,” he says. “It wound up being a positive message” when some of the bigger players came out and explained their policies and procedures for handling claims fairly, he adds.

Jodi Anatole, vice president, marketing and product development for MetLife’s Long Term Care Group, says her company has seen a strong upward sales trend. MetLife experienced LTC growth of 30% in the third quarter over the prior year.

She attributes that partly to the company’s recent participation in LTC Awareness Week (an industry-sponsored event that took place the week of Nov. 4) and to its new LTC policy, MetLife LTC LifeStage Advantage, initially available in 23 states.

“The product is simple to understand and includes innovate features that enable people to purchase coverage based on their life stage,” she says. That option lets buyers add coverage later with guaranteed insurability and no additional underwriting.

Riekse of LTCI Partners agrees that MetLife’s LifeStage and similar products are an easier message to sell.

“People can’t see themselves in a nursing home, but they can see buying coverage to set aside $500,000 to $1 million for home care,” he says

Dennis O’Brien, head of New York Life Insurance Company’s Long Term Care Division in Austin, Texas, says his company, too, has introduced a rider that allows the client to add coverage later, based on the rate when the policy was bought. “It provides meaningful protection at a lower cost than traditional inflation-protection coverage,” O’Brien says.

Agents can help perk up sales by looking carefully at what a client can afford and not being too quick to push relatively costly lifetime coverage, O’Brien says.

Many New York Life agents are asking consumers to consider what he calls “short, fat” policies, which provide high benefits for relatively short periods, such as 5 years.

“We’ll continue to encourage agents to sell comprehensive unlimited coverage to those who can afford it and limited coverage to those who can’t afford to pay larger premiums,” O’Brien explains.

New York Life saw an increase in LTC insurance sales of 15% last year and expects the same this year, he reports. “I think we’ve only scratched the surface in terms of what our distribution can do.”

David W. Simbro, vice president of Northwestern LTC Insurance Co., part of Northwestern Mutual Life Insurance Company, Milwaukee, Wis., says year to date through the third quarter, LTC insurance sales are up 25% for his company. “We’re now number 4 in new sales,” Simbro reports.

Northwestern announced a dividend for its LTC policies, lowering rates for 2007, and plans another dividend next year. “That has really sparked sales,” he says.

Along with other executives in the industry, Simbro notes LTC sales been kindled by higher interest from professionals such as accountants, financial planners and attorneys who feel their clients would benefit from LTC insurance.

Offering a broad line of life insurance also helps Northwestern agents in selling LTC insurance, he adds.

“We have 3 million relationships with other clients who own life and disability insurance, and they are a huge opportunity to also consider long term care insurance.”

John Noble, director of long term care products for Unum, Chattanooga, Tenn., reports his company’s group LTC insurance business had a “record year,” adding over 800 groups and 60,000 employees through the third quarter, with a good chance of achieving 1,000 cases by year end.

A major trend was in the growth of employer-funded base plans, where employers agree to fund a minimum level, such as a $2,000 monthly benefit for 2 years for professional home care. Employees often choose to increase benefit levels at their own expense, he notes.

The trend is dramatic,” Noble reports. “We’ve seen participation double with employer-funded plans compared to 100% voluntary.”


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