The panelists of a Friday morning session on the future of LTCI at NAILBA 33 didn’t agree on every detail of this ever-changing industry, but they were united on one thing: A healthy future will require insurance professionals to have an in-depth understanding of the products and the shifting regulatory environment.
Here are some of the highlights of the discussion:
Problems and solutions
“I’m often asked what is going to happen,” said Ron Hagelman (photo below), Jr., president of Broadtower Insurance Solutions. “People keep coming up with the same solutions, but the problem is too large for public or private industries. It will require a sustainable balance of public and private financing.”
“Private insurance needs to be an integral part of the LTC financial solution,” he added. “There will always be a place for us.”
Hagelman also shared a few of the findings from a recent report released by an industry think tank he was involved with made up of 45 industry experts:
- The answer can’t come in pieces – the solution must be comprehensive.
- The government must become more active, especially in consumer education.
- Tax incentives are needed.
- It may be controversial, but social insurance is needed. “There must be a relationship with the government, whether we like it or not,” said Hagelman.
- Medicaid reform is necessary to avoid a “crowd out.”
- Regulatory obstacles must be removed to encourage new product development.
- Product innovation must be supported, including: LTC savings plans, high deductibles, short-term policies, enhanced supplemental benefits and mutual funding strategies.
LTCI is “on life support but it’s stable,” according to Dawn Helwig (left, photo below), consulting actuary and principal at Milliman. There’s a future for private LTC, but there are major issues, she added. Pricing has gone through peaks and valleys, and many of the challenges are now driven by the investment market and lapse rates that have been much lower than anticipated. All of this leads to rate increases. Because no one likes rate increases, regulatory reaction has been forced to become stricter, she continued. Model regulation will require a minimum margin to be added to the products.
But she noted that the good news is that newer blocks of business are priced more properly, meaning future rate increases should be minimal. “New business is priced well and these policies are very much needed, Helwig said.” It has been publicly stated there will not be a public program anytime soon, so people have to self-finance or buy a policy, whether it’s combo or standalone.”
Approximately 30 percent of life insurance policies now have chronic illness riders, said Ross Bagshaw (right, photo below), principal and consulting actuary at Wakely Actuarial Services. “I think this will increase. The real issue is that some life insurance policies with these benefits only make the advisor feel better. But they’re not always a good deal for the consumer.” Some companies are trying to put LTC language in without calling it LTC to avoid regulation, he added, so it’s up to advisors to help consumers determine which riders or portions of the policies are valuable and which aren’t.
The takeaway: “You need to be clear about the type of product you’re selling. Understand the differences and what they mean.”
Helwig noted that while she believes combo products “have a great place, they’re definitely not for everyone. For one thing, they require a big chunk of assets and most are single premium.” She said she believes the consumer must really have a need for the life insurance portion of the product, because they’ll pay a lot of money for it. “A lot of the price is to cover the life insurance protection. If you don’t need it, stand alone makes more sense,” she said.
A little bit can make a big difference
“Short-term care products are designed to pay for recovery or fill gaps within LTC policies,” said Helwig. “They might be good for the middle income market due to the price,” but they don’t replace LTC. What they do help with is buying families’ time to establish benefits or make decisoins about home care, nursing homes, etc., she added.
“When it comes to LTCI,” concluded Hagleman, “some coverage is better than none. A small amount can make a huge difference and allow consumers to retain control of their lives.”