“Historically, individual products have emerged relatively unscathed from the effects of a recession,” says Karen Fisherkeller, LIMRA associate analyst, Group and LTC Product Research. Now, she says, all product lines are taking a hit, and LTCI in particular appears “vulnerable.”
“The economic downturn had a significant impact on LTCI sales during the second half of 2008,” Fisherkeller says.
Long term care insurance carriers now say they are struggling to convince consumers of the need to protect against the risk imposed by LTC needs. Individual LTCI premium fell 23 percent in the fourth quarter, ending 2008 down 7 percent, according to LIMRA’s “Individual Long-Term Care Sales” survey.
“Growth from the beginning of 2007 through mid-year 2008 gave the industry reason to believe that it had turned a corner following four years of declining sales,” Fisherkeller continues. “While current sales are discouraging, the industry remains hopeful that as economic times improve, so will the market.”
Unlike 2007, which racked up $650 million in new individual LTCI sales, 2008 growth reversed, ending with just over $600 million. The number of new individual LTCI buyers was down 7 percent at 277,000. LIMRA estimates these numbers near those in the 1990s.
The economic downturn has forced many boomers to reevaluate expenses, hoping to cut wherever they deem as unnecessary or risky. The sentiment is everywhere and is understandable, says Tom Riekse, Jr., managing principle at LTCI Partners, LLC in Lake Forest, Ill., and a contributing columnist at www.boomermarketadvisor.com.
“There is also understandable mistrust of the financial services world and insurers right now. Many boomers have always had suspicions of the sales approaches and promises that the previous generation took to heart. People aren’t eager to put their money in places that aren’t federally insured,” Riekse, says. “A better idea might be to look at two other approaches in discussing LTCI; as a family protection plan and as an adjunct to a new savings plan.”
Still the need to prepare for long term care expenses seems to be getting through to boomers more than with any other age group. More than half (53 percent) of individual LTCI buyers in 2008 were between the ages of 55 and 64; another 24 percent were between the ages of 45 and 54, according to the American Association for Long Term Care Insurance.
A view of the annual individual long term care sales growth can be found here.