The chat about long-term care insurance that many advisors have with their clients—and that many more avoid—has been growing more difficult as low interest rates and other market pressures take their toll on available coverage.
John Ryan of Ryan Insurance Strategy Consultants said advisors generally fall into two camps when it comes to LTCI. The first are “financial advisors who don’t believe in LTCI, and will do everything they can to reposition assets.” The second group uses LTCI “as a risk management tool.” Either way, said Ryan, “the eligibility window is shrinking quite a bit.”
In his latest market update, industry expert Claude Thau, director of insurance strategy and tactics for LTC insurance at Target Insurance Services, outlined some trends that could make advisors want to rethink those client chats, particularly with women and indecisive clients.
One major change that’s already occurred is gender-distinct pricing. According to Thau, at least four major carriers will charge women more than men for LTC coverage. Genworth already began the change in April in 31 jurisdictions. Others intending to put gender pricing into effect in 2013 are Transamerica, John Hancock and Mutual of Omaha.
Advisors aware of clients with a family history of serious health problems should urge them to reconsider delaying purchase. Companies are becoming less willing to insure people with health issues, said Thau, and as they step back from covering various conditions, other companies do the same.
He explained: “When one carrier refuses to accept a particular type of risk, others start to follow. They may adopt the same restriction because of their own experience or they may do so simply based on the belief that the other carrier must have had a good reason to take such a stand.”
He used Genworth’s decision to stop underwriting insulin-dependent diabetics as an example: “Other companies started seeing a significant increase in the number of applications from insulin-dependent diabetics. Even if those other insurers felt they could insure 30% of the insulin-dependent diabetics, the decline rate on such cases drives expenses up.”