Conning Analysts on LTCI: Demand Is King

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.