Falling interest rates seem to be hitting issuers of long-term care (LTC) hybrid products hard.
Actuaries at Milliman have included comments supporting that assessment in a new summary of results from an LTC hybrid issuer survey.
Seven of the nine carriers that participated said they had increased LTC hybrid prices at least once in the previous 12 months, and two said they had repriced their products three or more times.
“The low interest rate environment was reported as a factor by all seven participants,” according to the Milliman actuaries. “None of the participants indicated that mortality impacts due to COVID-19, adverse mortality experience, or change of profit target drove the repricing.”
- A copy of the Milliman analysis is available here.
- An article about an earlier Milliman LTC hybrid analysis is available here.
Carl Friedrich, Sue Saip and Al Schmitz are the Milliman actuaries in charge of the survey.
Milliman attracted 11 participants to a similar LTC hybrid survey conducted a year earlier.
An LTC hybrid is a product that combines LTC benefits with an annuity or life insurance policy, in an effort to ensure that a purchaser who never actually needs long-term care will still get some value from the product.
Life insurers believe that providing LTC benefits through a hybrid product may be safer for the insurer than providing benefits through a stand-alone long-term care insurance (LTCI) policy, because the performance of the underlying life policy or annuity contract might compensate for any problems with predicting the performance of the LTC benefits provisions.
All of the participants in the new Milliman survey base their LTC hybrids on life insurance policies, rather than annuity contracts.
Four of the carriers said they combine LTC benefits with universal life policies with secondary guarantees; three, with universal life policies without secondary guarantees; two, with non-participating whole life; one, with participating whole life; and one, with indexed universal life insurance.