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September 26, 2012 at 11:04 PM
During the past 40 years, we as an industry have introduced many long-term care insurance (LTCi) products yet consumers still aren’t buying in significant numbers.
Our customers and our nation need a successful long-term care insurance industry. Consumers need protection from the financial devastation of end-of-life long-term care expenses. Our nation cannot afford to pay LTCi expenses for the increasing number of people turning 65.
The aging baby-boom generation has arrived. About 78 million boomers were born 1946-64.
We estimate that 70 million boomers will age into Social Security and Medicare. This is often referred to as the “silver tsunami.” Millions will spend a lifetime of savings paying for long-term care services. Most nursing-home expenses are paid by Medicaid, and this ever-increasing liability will break Medicaid.
I first began hearing about nursing-home policies in the 1970s. These were primarily small policies and some agents were accused of aggressive tactics in selling them. Agent education and consumer protections improved the industry’s reputation in the 1980s. From the mid-90s to the about 2005, LTCi policies evolved and greatly improved. Long-term care insurance coverage grew more comprehensive and benefits became richer.
During the same 40-year period, increased awareness of diet and exercise combined with advances in healthcare to expand life expectancy. Morbidity became a greater risk than mortality, to individuals and society. The market was growing and so were our products.
Unfortunately, in the past decade a nearly perfect storm hit long-term care insurance. Persistency exceeded actuarial models resulting in a consistently growing liability to the insurance carriers. At the same time, a long-term low-interest-rate environment continually reduced returns on investments.
This perfect storm has resulted in several prominent long-term care insurance carriers leaving the marketplace. Others who remain have restructured and re-priced their long-term care policies. Neither of these results is good for the stakeholders involved — not the consumer, not for the insurance industry, and certainly not for the American economy and society.
