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How the Recent Upheaval Might Affect Long-Term Care Planners

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The head of a long-term care products distributor says the Covid-19 pneumonia outbreak and the resulting turmoil could have mixed effects on long-term care insurance planning products and product issuers.

(Related: 5 Things to Know About Pandemics, for Annuity Sellers)

Tom Riekse Jr., the managing director of LTCI Partners, talks about the effects of the situation in a new blog post on his company’s website.

The LTC advisors themselves can meet with clients over the telephone or through video conferencing software, and they can already submit the applications using electronic application systems, Riekse writes.

For the product issuers, he says, Covid-19 pneumonia could lead to decrease in benefits costs.

But, if alarm over Covid-19 leads to dramatically lower interest rates, that could make it more difficult for insurers to earn the rates of returns that were assumed in the product pricing, Riekse says.

Issuers of stand-alone long-term care insurance policies have the ability to pass some of the impact of inaccurate product performance assumptions on to the policyholders, in the form of premium increases, Riekse says.

Issuers of most life insurance policies that provide LTC benefits offer guaranteed premiums.

The life-LTC hybrid premium guarantees put “the interest rate risk on the carrier, while the policyholder will see LTC benefits increase in the future,” Riekse writes.

The lag between the time conditions change and the time products and rates change means that consumers with applications well along in the pipeline may still be able to benefit from the old prices and benefit designs, Riekse writes.

Riekse says LTC planners have to stay on top of the situation to maximize the number of clients who benefit from the old prices and benefit designs.

“Carriers typically give very little notice, to avoid fire sale situations, and advisors may simply miss being aware of the change,” Riekse writes. “In addition, the volume of application submissions during these product changes may mean delayed processing time. Unfortunately, we’ve seen circumstances where consumers have had cases in underwriting and passed deadlines for issuing contracts — meaning they missed out.”

LTC planners should always look at the financial strength and track record of the issuer, Riekse says.

But, whatever the market conditions might be, “the best time to plan for long-term care is now,” Riekse writes. “And the best time to buy LTC Insurance products may be now as well.”

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