The growing number of Americans age 65 and up–more than 37 million strong–and the industries that support them are undergoing fundamental change.
Demographics, rising healthcare premiums and longer life spans have had a significant impact on the market for long term care insurance. From its earliest inception some 40 years ago as a product designed mostly for older Americans living in nursing homes, to its standing today as a key component of a comprehensive financial plan, LTC insurance has continuously evolved to meet the needs of the market.
Some LTC product changes, both past and future, stem from customer and agent input. Today, consumers want simpler, more flexible LTC policies. Agents are looking for products that are less complicated and easier to sell.
Other changes are driven by industry trends. For example, robust claims data is shedding new light on emerging experience; and new technology and medical treatments have become more readily available, affecting life span and underwriting criteria. Taken together, these changes are making an impact on all aspects of long term care insurance, including product development, pricing, marketing and distribution, underwriting, and claims.
Product development
As boomers prepare for retirement, LTC insurance buyer demographics and demands continue to change. These factors have spurred innovation in product features and design.
One result has been increased receptivity among people in their 50s to purchase LTC insurance. New research by the American Association for Long Term Care Insurance found that one-third of buyers of individual long term care insurance in 2007 were under age 55. And many (over 2 million, according to LIMRA International) bought it at the workplace through their employer.
Another result has been simpler products. Among recent innovations are products that allow individuals to buy a relatively small amount of LTC insurance to start and increase coverage over time.
Such developments show consumers that the LTC insurance industry is listening and adapting to their needs. Over the next few years, consumers are likely to see an influx of more innovative products. As with other industries, it's a given that these products and the way they will be delivered to the market will evolve. For example, it would have been hard to predict 15-plus years ago that standard carrier correspondence would evolve to e-mail, which then further evolved to include text messaging.
Among the changes the industry is likely to see are bundled products, which combine LTC insurance with other products, such as life insurance and annuities.
LTC insurance has made great progress toward helping individuals safeguard their retirement income and assets and to pay for the care they may need. We can expect more advances from the industry in coming years.
Pricing patterns
Simply put, the longer individuals live, the greater their potential need for long term care. Prices have generally increased over time as more people use this valuable benefit.
So what will pricing look like in the future? It's difficult to predict, as product changes and innovations depend largely on external factors, including demographics and advances in medicine. Progress in the way that we treat debilitating illnesses such as Alzheimer's or Parkinson's disease and changes in the economic environment will all likely affect the price of LTC insurance.
One thing is certain, however: With 77 million baby boomers approaching age 65, the need for LTC insurance will increase. As this happens, we need to provide product solutions that appeal to a broad consumer base as well as price points that address this need.
Marketing and distribution
The LTC insurance industry faces major challenges in marketing the product. The numbers themselves speak directly to the problem: The customer base for LTC insurance is estimated at 100 million, yet industry data reports that only 8 million own policies today. How will the industry address this challenge?
