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LTCI: The new crop

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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.

There are also linked benefit products that give life insurance and long-term care equal footing in the plan. If the long-term care benefit is never used, then the life insurance is paid out at time of death. If long-term care is needed, then the life insurance amount available for payout at death would be reduced. The benefits are paid out one way or another.

Another option carriers are looking at is pricing for high-deductible LTCI plans. A consumer would select a deductible of $50,000 of $300,000. The carrier would start paying insurance benefits after the deductible was met.

See also: Consultants: United Kingdom needs private LTC products

We are seeing a different thought process and a different mindset from carriers regarding innovative new product designs. The carriers realize that their products have to offer the benefits wanted by today’s consumer at a price that is affordable.

Long-term care insurance products are changing, but their importance is not. There are many different ways to protect your client and your client’s assets from long-term care costs. The important thing is that you are having the conversation with your clients about their long-term care needs and showing them the many different solutions you can provide.

See also: Not your father’s LTCI

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