Long-term care insurance (LTCI) has a reputation for being a product with a low lapse rate, but two researchers argue that the LTCI lapse rate is higher than many realize.
Yong Li of Competitive Health Analytics Inc., Louisville, Ky., and Gail Jensen of Wayne State University have published an analysis of LTCI lapsation in Applied Economic Perspectives and Policy, an academic journal distributed by Oxford University Press.
The study may be the first study from outside the insurance industry that looks at the relationship between LTCI policy characteristics and LTCI policy lapsation, the researchers say.
The lapse rate for any 2-year period between 2002 to 2008 was about 13%, the researchers say.
The 2-year lapse rate started at 14% in the 2002-2004- period, fell to 13% in the 2004-2006 period, and then fell to 12% in the 2006-2008 period, the researcher say.
The lapse rate estimate “implies that only half of today’s LTCI policyholders will still carry LTCI 10 years from now, while the other half will have dropped it,” the researchers say.