There has been a fair amount of concern and frustration in recent years among producers and consumers towards long-term care insurance (LTCI) and what seemed like never-ending rate increases. The amount of uncertainty related to increased rates is concerning to both existing clients and new prospects.
Rate increases in previously written blocks of business probably will have some additional adjustments in years to come as the carriers grapple with trying to keep those plans above water and still profitable, especially in this low interest rate environment. We certainly want the carriers to pay their claims and fulfill their commitment to their policyholders, so rate adjustments become a necessary evil.
Today, carriers have more experience with this product. That gives carriers an opportunity to better understand the claims process, persistency, and mortality, and that improved understanding bodes well for the pricing of the new plan designs the carriers are implementing. Carriers are concerned about having to raise rates on clients after they purchase the insurance and are looking for ways to mitigate that issue as much as possible.
Some carriers have introduced plans designed to have small, automatic increases in premiums occur at set intervals throughout the plan’s lifetime. These plans are still competitive and affordable. This design could potentially prevent unexpected rate increases further down the line.
Other carriers have brought out plans that have a credit account built into the product. The credit account allows the credits, accumulated over time, to be used to offset any rate increase that the carrier may need. Again, this is another attempt to find a way to minimize the need for rate adjustments later on.
Additionally, hybrid and linked products can be the right products for some clients. If the client is investing money in an annuity and long-term care (LTC) needs are even a mild concern, then having an annuity with long-term care benefits might just make sense. Even if long-term care issues never present themselves, the annuity value is still there to provide income or a means of funding their legacy.