Organizers of the recent Intercompany Long Term Care Insurance (ILTCI) Conference looked hard for speakers who had new ideas for paying for long-term care (LTC) services.
One of the speakers, Mark Dearsley of Partnership UK, talked about an old idea that’s been getting more attention lately: the use of immediate annuities, or annuities that start paying a guaranteed stream of income immediately after consumers buy them, to pay LTC bills.
The National Association of Insurance Commissioners (NAIC) set guidelines for retail single-premium immediate annuities (SPIAs) in 2001. The idea was that retirees could put the lump sums they got from selling houses or other major assets, such as family businesses, into SPIAs.
Some carriers built on that idea by offering impaired risk SPIAs — or immediate annuities designed for people who already had serious health problems. Golden Rule Insurance Company and other impaired risk SPIA issuers aimed the products at older people who were already getting LTC services and needed financing options.
Impaired risk SPIAs have been more visible in the United Kingdom in recent years than in the U.S. market.
See also: What? Impaired Risk Immediate Annuities?
For a look at a few of the things that Dearsley said about the products, based on his ILTCI Conference slide deck, and implications for U.S. LTC planners, read on.
1. The United Kingdom is facing terrible LTC planning problems.
Roughly 13 percent of the U.S. population have some kind of LTCI arrangements in place.
In the United Kingdom, private LTCI penetration peaked at less than 1 percent, according to the Association of British Insurers.
Because the vast majority of the U.K. population arrives at the point-of-need unprepared, the main focus for private insurers has to be on point-of-need solutions, Dearsley said.
See also: 5 possible cures for what ails LTCI
2. Insurers have built a healthy little U.K. care annuity market.
Partnership has been competing in that market with Friends Life and Just Retirement. It’s now in the process of merging with Just Retirement.
The three companies generated about $200 million in care annuity sales in 2014.
Issuers have been selling the products through LTC planners and through general financial advisors.