What could tempt insurers back into the U.S. long-term care insurance (LTCI) market?
Nothing whatsoever, ever, according to some insurance company executives.
Others say a variety of regulatory changes — including a move to let issuers tie in-force premiums to an interest rate index — could make their companies more interested in returning to the LTCI market.
Marc Cohen, chief research and development officer, at LifePlans, made that argument recently at a hearing on the LTCI market organized by the Senior Issues Task Force, an arm of the National Association of Insurance Commissioners (NAIC).
The task force convened the hearing at the NAIC’s fall meeting in Washington.
State regulators have been looking at the market because of increases in rates for in-force and new coverage, and reports of carriers dropping out of the market.
Cohen based a portion of his presentation on the results of a survey of executives at 26 insurers that have left the U.S. LTCI market.
The study was funded in part by an arm of the U.S. Department of Health and Human Services (HHS). The Society of Actuaries also helped LifePlans with the survey.
LifePlans found that 69 percent of the LTCI market dropouts cited product performance as the main reason their companies left the market. “Concern about ability to get rate increases if necessary” ranked second as a reason for leaving the market, with 62 percent of the participants giving that as a reason to stop selling LTCI coverage, according to a written version of Cohen’s presentation posted on the Senior Issues Task Force section of the NAIC’s site.
When asked how likely the companies were to return to the LTCI market, “very low” or “not going to happen” accounted for 76 percent of the responses, Cohen said.
About 20 percent said there was a high or medium chance their companies could return to the LTCI market.
The participants cited changes to the structure of the product regulatory changes, changes in consumer attitudes, and changes in tax policy as shifts that could get their companies to take another look at the LTCI market.
The Federal Reserve Board has been working to keep interest rates low, in an effort to hold down the cost of the money banks borrow to meet their obligations and in an effort to help consumers and businesses with variable-rate debt, such as variable-rate mortgage loans.
Some have suggested that years of very low interest rates have decreased the attractiveness of many insurance products, including LTCI products, by decreasing the yields insurers can get on assets invested in high-quality bonds.
Traditionally, insurers have used interest earnings to pay a portion of their LTCI and long-term disability insurance claims.
When LifePlans asked LTCI market dropouts about product changes that could get their compaies to take another look at the market, the most popular change was getting “the ability to file multiple sets of new-business premium rates, the use of which is automatically determined by an external interest-rate index for new-business premium rates and in-force premium rates.”
About 40 percent of the participants said regulations permitting that kind of product design might increase their companies’ interest in returning to the LTCI market.
The second most popular hypothetical change was getting the “ability to file multiple sets of new-business premium rates, the use of which is automatically determined by an external interest-rate index.”
The proposal to let insurers tie premiums for new LTCI policies could possibly tempt 36 percent of the participating companies to think about returning to the LTCI market, according to the survey results.
Cohen said efforts to re-set the LTCI industry should focus on lowering the cost of policies, allowing greater product funding flexibility, supporting new forms of products that combine LTC funding features with non-LTCI products, and encouraging strategies that help reduce LTCI carriers’ exposure to risks outside their control.