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LTC Insurance On The Tarmac, Awaiting Take-Off

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The horizon for the long term care insurance industry looks brighter now, with sales showing modest growth in 2007 after four years of discouraging results (see chart). However, its future is still uncertain. This is like sitting on the tarmac, waiting for the right conditions, and being fairly sure, but not certain, that take-off will eventually occur.

Where LTC insurance is concerned, the question is will it ever be embraced by Americans to the degree of other long-established financial products?

Legislative changes in the form of the Deficit Reduction Act of 2005 and the Pension Protection Act of 2006 provide incentives for purchasing LTC insurance–an unequivocal message that the government expects individuals to take on greater responsibility for funding their LTC.

Sales volume, however, suggests that Americans are not getting the message or, more likely, are reluctant to act on it.

American consumers are still deeply immersed in ignorance, apathy and denial when it comes to planning for potential LTC expenses, according to LIMRA research. Consumer resistance is further fueled by the price and complexity of LTC insurance, providing nonbuyers with justification for dismissing the insurance.

So what can be done to move more Americans to insure for this risk?

Legislation and industrywide efforts to encourage LTC planning and to create more positive messaging around the LTC insurance product and industry are steps in the right direction. Whether consumers are simply in denial or too busy dealing with today’s concerns, it is imperative that the industry keep attention focused on consumers’ need to protect for LTC risk.

The government needs do its part too by repeating the message loud and clear that this responsibility is the individual’s.

Ultimately, the LTC insurance sale is made at the kitchen table. Consumers want and need to speak face-to-face with a knowledgeable intermediary. Therefore, producer training is essential. For a while, producers have expressed discomfort that the LTC insurance product is like no other. While LTC specialists are well-equipped to sell, the mass of producers are not, and they seem to have become less interested in doing so. This means carriers must engage new individuals to sell LTC insurance and provide them with the product knowledge and sales skills to realize success.

Coming up with innovative approaches that address consumers’ price concerns is another step forward. Historically, the industry encouraged purchase of LTC policies rich in protection. Newer products offer various levels of coverage with the idea that some coverage is better than none.

Affordable coverage opens the door to those who might otherwise not have been able to purchase. As financial circumstances change for the better, the hope is that many will then choose to increase their protection.

There is room, too, for combination products that link LTC insurance with other coverages and that address consumers’ “use it or lose it” concern about stand-alone LTC insurance policies. Some industry experts believe that in the future, these newer hybrid products will share the marketplace equally with stand-alone LTC policies.

Consumers seem to be quite receptive to the concept. In focus groups conducted by LIMRA in 2007, customers indicated they value the choice and flexibility provided by the concept of combining LTC coverage with either a life insurance or annuity product. The most appealing aspect? The fact that the premiums will definitely result in some type of benefit being paid, whether it be coverage for LTC needs, life insurance proceeds paid to a beneficiary, or supplemental income in retirement.

The industry will, of course, have to deal with many issues related to these new types of products. Suitability is a major concern. Also, consumers made it clear in focus groups that while new options in LTC coverage are appealing, they would want their agent to provide a way of comparing these options. This may be easier said than done, considering the complexity of various products and innovations.

At the end of 2007, some 15 to 20 companies offered some type of life insurance policy that also provides for LTC benefits. Fewer companies offered a true annuity/LTCI combination, but a significant number had such a product on the drawing board.

On a state and federal level, additional legislative incentives that support the purchase of LTC insurance are needed to make products more attractive to the consumer. Like the product, the solution is complex and there isn’t any easy answer that will address the question of when and how the LTC insurance industry will at last get off the ground.

Karen Fisherkeller is an associate analyst with LIMRA International, Windsor, Conn. Her e-mail address is


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