Credit: KatarzynaBialasiewicz/iStock
A financial advisor told state insurance regulators recently that he is worried about the future of some of the long-term care riders sold with life insurance policies and annuity contracts.
Christopher Gandy, the founder of the Legacy Wealth Group and the president-elect of the National Association of Insurance and Financial Advisors, talked about his concerns earlier this month at an in-person session of the Senior Issues Task Force.
The task force is part of the National Association of Insurance Commissioners. It convened at the NAIC fall national meeting in Hollywood, Florida.
Gandy — who helps clients with long-term care planning and hybrid products himself, and who is a strong supporter of efforts to offer clients well-managed, well-explained hybrid products — told task force members that he fears that some LTC hybrid providers might use weak pricing and underwriting strategies, and that some of the agents who offer LTC hybrid products might not understand the products very well, according to a task force minutes packet.
"Gandy said he has concerns that carriers are currently prioritizing market share over sound underwriting practices," according to the task force minutes. "To attract younger clients (under age 45 or 50, who were previously denied coverage), companies are potentially underpricing products and relying on 'algorithmic underwriting.' He said he believes some individuals who are uninsurable are obtaining the best rates through this automated system."
Advisors are getting less education about LTC product options, and insurers are making more use of automated systems to handle customer service, Gandy said.
He suggested that regulators could help by developing standard ways to describe LTC product provisions and by setting clear advisor education standards.
What it means: States could look into setting new rules for life-LTC and annuity-LTC hybrid products.
The backdrop: In the 1990s, dozens of insurers sold stand-alone long-term care insurance policies.
Most of the issuers discovered that they had gotten their assumptions about policyholder behavior and bond market performance wrong, and most fled from the market.
Now, some insurers are trying to overcome the problems in the stand-alone LTCI market by offering life and annuity products that come with some long-term care benefits.
Some issuers have argued that the likely behavior of the underlying life and annuity policies will tend to offset the behavior of the LTC benefits provisions and tend to reduce the overall risk of the hybrid products.
Credit: KatarzynaBialasiewicz/iStock
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