Long-term care (LTC) planners will start 2015 knowing that interest rates are still low, rating agencies and shareholders are still tough, the (rapidly aging) Baby Boomers are still in denial, and everything that can go wrong will, of course, go spectacularly wrong.

But major organizations continue to care enough about meeting the long-term care needs of the people of the world that they scrape up the time and cash to publish major reports on the topic.

The American Council of Life Insurers (ACLI) weighed in.

Genworth, Northwestern Mutual, Nationwide and other insurers did what they could to jump up and down as hard as they could to get everyone else to wake up.

Swiss Reinsurance Company participated with a sobering report about the global LTC planning problem. 

Progress seems slow, and uncertain, but just the fact that so many big, high-profile organizations care deeply about the topic may mean something. Insurance industry luminaries have parents, too, and they see the need for planning first-hand.

Kulli Tamm, a senior economist at Swiss Re, took some time to participate in an e-mail interview about the LTC planning challenges. 

For rays of hope drawn from her answers, read on.

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1. Insurers are getting better at designing and building stable LTC financing vehicles.

Designing stand-alone long-term care insurance (LTCI) has been very difficult, Tamm says.

“How can you really predict 40 to 60 years ahead?” Tamm asks. “Many decades can pass between the design and pricing of the contract and the eventual payment of benefit.”

Advisors used to stand-alone LTCI have raised questions about the nuts and bolts of the provisions inside some products based on life and annuity foundations, but the new products should be less sensitive to changes in assumptions, Tamm says.

Image: AP photo/Jacquelyn Martin. 

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2. Financial incentives have spurred sales in other countries.

Selling voluntary, consumer-paid LTC financing products is challenging in all markets, but insurers in Germany, for example, have found that subsidies have helped increase sales of supplemental products and reduce consumers’ LTC protection gap, Tamm says. 

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3. Consumers may really benefit from low interest rates.

The current low interest rates are hard on insurers and savers, and a lay observer may feel as if the only borrowers that can get loans are billionaires and companies with New York Stock Exchange listings.

But “despite anecdotal evidence to the contrary, credit conditions have been easing for some time now,” Tamm says. “We can see it in the slowly healing and improving housing markets, and definitely in the auto markets, where the share of sub-prime auto loans is nearly back to pre-crisis levels.” 

If low rates help consumers’ finances, that may help them find the money to buy more insurance, including LTC financing products.

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4. Interest rates could gradually start to rise.

“Slow rising rates are the ideal scenario,” Tamm says. “One they have been hoping for.”

Even modest in interest rates could lead to a big improvement in the finances of blocks of LTCI business. 

See also: AALTCI tries to explain effects of interest rates