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LTCI Watch: Looking Ahead

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One of the big problems facing the long-term care insurance (LTCI) community right now is that everything seems to be conspiring to keep us from thinking much about the future.

The future is big, scary and uncertain, interest groups have turned projections into political punching bags.

Maybe we should, um, pollute less? Communist!!!

Maybe we should, um, spend less? Fascist!!!

And so on.

The Federal Reserve Board and other key central banks have, despite all of their best intentions and genuine respect for long-range thinking, added to the pressure for a short-term outlook by keeping the interest rates they control so low, in an effort to nurse the economy back to health.

Instead of nursing the economy back to health, the central bankers have, in spite of their kindness and goodwill, just hooked ordinary retail bankers on the vice of getting one kind of low-rate, short-term government money and profiting by parking the money in slightly higher rate, slightly longer-term government bills and, possibly, notes. Or quasi-government-backed assets that still seem to be too big and politically popular to be allowed to file.

Take a risk on lending to a small local business that has been in town for 40 years but has had ups and downs in cash flow in recent years because of all the turmoil? Why, what bankers in their right mind would dream of doing such a long-term thing when government bonds and Uncle Sam-backed securities are there for the buying?

LTCI carriers and other carriers that sell products “with long tails” – claims that could last for many years, and the potential to incur claims many years in the future — are some of the victims of this kind of short-term thinking, because they need for the customers to plan for the long-term, and they need stable, long-term investments that yield reasonably good rates. Hard to get reasonably high rates when the central bankers are devoting so much energy to fiddling with them.

One possible antidote to short-term thinking is the Long Now Foundation, San Francisco.

The foundation was set up in 1996 to foster long-term thinking and responsibility in the framework of the next 10,000 years.

One of the foundation’s projects is to set up a large, strong mechanical clock inside a Texas mountain that will tick once a year, bong once a century, and send out a cuckoo once a millennium.

The clock is supposed to be part of 10,000-year library aimed at people who are trying to think about the future.

“The point is to explore whatever may be helpful for thinking, understanding, and acting responsibly over long periods of time,” organizers say.

The musician Brian Eeno, who is helping develop the chime generator for the clock, appeared Thursday on the Colbert Report on Comedy Central to talk about his work on the clock project and sing Bill Withers’ “Lean on Me” with the host, Stephen Colbert, and Michael Stipe.

That song is another antidote to short-term thinking.

“Lean on me, when you’re not strong, and I’ll be your friend, I’ll help you carry on,” the performers sang. “For it won’t be long, till I’m gonna need, somebody to lean on.”

And that of course is one of the points of LTCI – we pay in both to help others now and to help ourselves in … the future.

LTC insurers are not having an easy time right now, but the future is rolling toward us, and at least LTC insurers are standing up and trying to do something about it.