In 2009 there has been a relative flurry of new product innovation and development in long term care insurance.
Some of the innovation was motivated by the dramatic repricing in the industry. But it came at the pace of a tortoise, no matter how nimble the insurer. That’s because the business has a long lead time to market, as products, premiums and marketing materials must wind their way through each state’s insurance department.
Repricing made some of the most popular plan designs unaffordable, driving some “out-of-the-box” thinking and new product innovation.
Consider: Lifetime benefit policies have never been inexpensive, but now they are prohibitively expensive for many. One response to this new reality has been an emphasis on, and flight to, shared care policies, where two insureds share a benefit (presumably larger than they could afford individually).
Another example: Built-in inflation protection has always been a very expensive component of LTC insurance. It makes an otherwise easily affordable policy sometimes unaffordable. This is compounded (pun intended) by the repricing of the last few years.
So, how has the industry tried to make LTC policies more affordable, while still maintaining the integrity of the value proposition to the consumer? One way seen in 2009 was to re-engineer the architecture of a policy. Zap–no daily benefit. Be gone, benefit period. Instead, the insured purchases a true pool of money, more like a policy maximum on a health insurance policy. Buy a big enough pool and inflation protection can become less important.
Certainly consumers can take solace in having, say, a $300,000 pool of money dedicated to LTC costs, the same way that they may have a $300,000 face amount in life insurance.
Of course, as purchase age drops, whether inflation is purchased through a rider or built into the pool of money, there’s no getting around the fact that the future purchasing power of a particular policy must be understood.
This awareness raised questions about the emerging role of the agent. Is that role to leave the client better off than he or she found them? Is something always better than nothing? What is good enough, and what is simply not good enough? These are questions with which companies, agents, and consumers are grappling at year end.