Close Close

Life Health > Life Insurance

LTCI Watch: Not Targeted for Growth

Your article was successfully shared with the contacts you provided.

Companies that write disability insurance get together regularly to at least pay lip service to the idea that their product is important, that they ought to price it in a sensible way, and that they ought to figure out ways to promote it better.

Disability insurers have, for example, created a fairly high-profile Disability Insurance Awareness Month campaign.

Long-term care insurers (LTCI) and distributors have tried to do the same with the 3 in 4 Need More Campaign, for example.

Maybe, in the case LTCI market, even insurers that have dropped out of the market ought to team up to figure out how to make the market more attractive.

Some producers chortled with glee when actuaries at the U.S. Department of Health and Human Services (HHS) made HHS give up on the idea that HHS could make the Community Living Assistance Services and Supports (CLASS) program sustainable.

Unfortunately, it seems as if many commercial insurers with individual and voluntary group LTCI programs have come to similar conclusions about private LTCI programs.

Unum Group Corp., Chattanooga, Tenn. (NYSE:UNM), recently shut down its group LTCI program.

Manulife Financial Corp., Toronto (TSX:MFC), has put the John Hancock Long-Term Care unit in a businesses “not targeted for growth” category.

Carriers have been deciding that the interest rates insurers use to build earnings on invested assets are low and seem as if they will stay low for a long, long time; that marketing LTCI is hard; and that the people who do buy LTCI coverage cling to policies with an iron grip that throws off actuarial projections.

Stephen Moses of the Center for Long-Term Care Reform Inc., Seattle, has argued passionately, and persuasively, that Medicaid programs have undermined private LTCI programs, by creating what will no doubt soon prove to be the brutally incorrect illusion that Medicaid will provide a decent level of nursing home care for just about everyone outside the Top 1% who knows how to hire a Medicaid planning advisor.

But the actual LTCI program performance has not been all that horribly wretched, at least when reported in terms of Generally Accepted Accounting Principles (GAAP).

At Manulife, for example, sales dropped to $15 million in U.S. dollars, from $42 million.

Sales dropped partly because Hancock has asked state insurance regulators for premium rate increases averaging about 40% on the majority of its in-force retail and group business and has received approvals for increases in 29 states, the company says.

Because of the drop in LTCI sales, LTCI commissions fell to $37 million, from $63 million.

But the other performance figures were not that bad.

The LTC unit is reporting $243 million in net income for the latest quarter on $758 million in operating revenue, up from a net loss of $33 million on $681 million in operating revenue for the fourth quarter of 2010.

The LTCI premium and deposit total increased to $563 million, from $552 million.

Somehow, it seems as if companies could find a way to love a business that can produce $563 million in premiums and deposits in a quarter even when it’s become a pariah.

And LTCI coverage is not a funny summer movie, a pretty new cell phone, or an insurance product that helps young, relatively healthy people live a slightly more comfortable life.

LTCI is a product that, when it works properly, protects people who have done everything they possibly can to prepare for the future when those people are in the most desperate need of help with maintaining a decent quality of life.

Many of the companies that are leaving the LTCI market have tried to carry on the LTCI mission by building long-term care (LTC) benefits into life insurance policies, annuities and other products.

I think the people who understand how important LTC finance is could take that effort a step forward by brainstorming about what the future of private LTC finance and delivery might look like.

Can it all be handled through life and annuity hybrids? Should some come through health insurance-LTC hybrids? Did some country in Europe have a facility-based or cooperative-based strategy that worked reasonably well at some point after the fall of the Rome?

Fear and loathing of the government aside, how well is the government LTCI program in Japan working, and is there anything we can learn from it?

At these the right questions? If not, what are the right questions?