Authorities in the long term care insurance industry think they 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 2007 as a whole.
In 2008, 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 3rd quarter. Although its individual LTC sales were flat, sales of linked-benefit products were well up this year, along with group and multi-life 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,” he says.
Stinson also expects a “lot of traction” from his company’s recent endorsement by AARP, Washington. In July, 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 is projecting $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 3rd quarter and plans to offer to AARP members as well.
Among other features, Cornerstone offers a 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.