Harry and Joyce Smith prepared for the future by buying LTCI; many other retirees have not. (AP Photo/John Miller)

Long-term care insurance (LTCI) carriers face the effects of wretchedly low interest rate earnings on reserves.

LTCI carriers also face the effects of the soft economy, past problems with pricing, and current consumer and regulator resistance to premium increases.

Even some of the bigger carriers look as if they are getting out of the business.

But Scott Hawkins and Terence Martin, analysts at Conning Research & Consulting, Hartford, said during a recent interview that the root of the LTCI community’s problems is a lack of customers, not carriers.

“The issue isn’t one of supply,” Hawkins said. “It’s demand.”

“If there was increased demand, I think you’d see more companies get back in,” Martin said.

Conning recently published an LTCI market review in which its analysts talk about insurers’ mixed sales results and pricing troubles.

Hawkins and Martin acknowledged that LTCI sales have held up reasonably well.

In 2011, “it was a lot of kind of the same as before,” Martin said.

Sales have been plugging along, but just plugging along, and the state Long Term Care Partnership programs — which allow purchasers to coordinate private LTCI benefits with Medicaid nursing home benefits — have had little noticeable effect on market penetration, Martin said.

The LTCI market is the most concentrated life and health market Conning follows, and, as the federal government expands efforts to oversee the insurance business, officials could focus their attention on LTCI rate increases, Hawkins said.

When an LTCI carrier wants to get out of the business, it may resort to using a captive to reinsure the block, and carrier-to-carrier deals tend to involve transfer of administrative functions rather than rewriting of policies, Martin said.

Absent a big increase in demand, Hawkins and Martin see little reason to expect to an influx of new carriers, even after the economy improves and rates increase.

Carriers already in the market have an edge, because they have access to large amounts of claims experience and underwriting expertise, the analysts said.

Hawkins said he thinks the new life-LTC and annuity-LTC hybrids offer some reason for hope, in part because he believes a hybrid product structure can help overcome consumer resistance to the idea of paying a large amount for a product that might not be used.