The carriers that have stuck with long-term care insurance (LTCI) may be taking a longer-term approach to growing the market.
Tom Riekse Jr., a managing general principal in the Lake Forest, Ill., office of LTCI Partners Inc., gave that assessment in a recent interview.
Many LTCI carriers have pulled back from the market in recent years, burned by a combination of soft demand, a low-interest-rate environment that makes earning a profit on insuring any long-duration risk a challenge, and problems with forecasting policy persistency and claims.
But Riekse, a veteran LTCI brokerage general agent, said plenty of LTCI coverage is available — for applicants that qualify for coverage and can afford it.
"We're seeing a pretty good supply of carriers right now," Riekse said.
What Riekse is not seeing is insurers out buying business with unusually low rates or unusually accommodating underwriting practices.
"The companies are not competing on underwriting," Riekse said. "They want to avoid adverse selection."
In the group LTCI market, for example, Riekse has no problem placing a healthy group.
He continues to see placement rates of about 75% for individuals and higher placement rates for groups.
He sees little carrier interest in offering LTCI on a guaranteed-issue basis to every working employee at a sponsoring employer, and carriers also seem less inclined than they were to offer employer plans coverage on a simplified underwriting basis.
Some have pointed out that, despite all of the reports about LTCI carriers increasing rates, on an inflation-adjusted basis, LTCI is now cheaper than it was back in the 1990s.
Although coverage may be cheaper on an inflation-adjusted basis than it was 15 years ago, it's still somewhat more expensive than consumers and their LTCI advisors have been used to, Riekse said.
A few years ago, he saw some carriers offering relatively low rates, and others selling coverage for quite a bit more.
Now, the low-priced carriers have dropped out of their market or increased their rates.
One carrier had been trying to sell what it thought was a properly priced — and higher priced — product.
For several years, that carrier stayed on the sidelines, watching the carriers with the lower-priced products discovering that their prices were low.
Now, that carrier with the higher priced product has come back into the market — and the price of its product is comparable to what competitors are charging, Riekse said.
"Everybody else has caught up, from an actuarial assumption perspective," Riekse said.
Many consumers have had LTCI policies with 5% compound inflation protection. In reality, in recent years, the inflation rate for long-term care (LTC) services has been substantially less than 5%, and, for carriers, "the 5% inflation option is really expensive to price for," Riekse said.
One way for producers to help clients with tight budgets is to encourage them to consider inflation protection options other than 5% compound inflation protection, or to consider protecting against inflation by recommending the purchase of an option that gives the holder the right to buy more coverage without providing proof of insurability.
A consumer who has an option to buy more LTCI coverage in the future need not pay for the extra coverage today but can pay for more coverage later, possibly with inflated dollars, if inflation makes that necessary, Riekse said.
Despite the tougher underwriting and pricing environment, employer and individual consumer demand seem to be continuing to grow, Riekse said.
The baby boomers' parents are getting older and starting to need LTC. When boomers get involved with arranging and paying for LTC for their parents, they start to think about LTC planning for themselves, Riekse said.
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