Analysts at Fitch Ratings give long-term care insurance (LTCI) poor marks in a review of the statutory results of U.S. individual LTCI operations.
The analysts at Fitch, Chicago, head the review with the assessment, “Unfavorable Results; Uncertain Outlook.”
“The need for long-term care insurance is well-documented,” the analysts write. “The graying of America is expected to accelerate with the baby boomer generation starting to turn 65 beginning in 2011.”
But growth in LTCI premium production and covered lives has stalled, market share is more concentrated than in other major insurance markets, and the regulatory environment is still uncertain, the analysts say.
The U.S. Department of Health and Human Services (HHS) has been considering a proposal that could limit LTC insurers’ ability to use applicants’ family history or genetic testing results in underwriting, the analysts say.
But the analysts say the biggest problem with the LTCI line has been a combination of a need for high reserves and the difficulty of pricing a relatively new product.
Acquiring a customer is expensive, and reserving requirements are high, because of the need to anticipate the likelihood that claims will be much higher in the future than they will be in the near term, and that policyholders who do file claims could collect benefits for a long time.
In a table based on statutory data from the major U.S. individual LTCI writers, the analysts show that total LTCI earned premiums increased to $6.6 billion in 2010, up from $6.3 billion in 2009, and up from $4.9 billion in 2006.