It's debatable if the fiduciary standard is 'higher' than suitability. But the better question might be, who's holding the bar?
By Cyril Tuohy
Executives with long-term care insurance carriers shrugged off talk of gloom and doom in the market, pointing to the surge in demand for the coverage as baby boomers look to transfer longevity risk to LTCi carriers.
LTCi carriers are emerging from a period of contraction during which carriers pulled out of the market and prices shot up.
Twenty years ago, many carriers underwrote LTCi policies too cheaply and faced billions of dollars in losses as the cost of providing long-term care increased. The financial crisis compounded the problem, leading to fears of a gloom and doom for the LTCi industry.
Such fears are overblown, said Tim Kneeland president of Transamerica Long-Term Care. “We don’t have a demand problem, but rather a supply issue,” he said.
Many new stand-alone LTCi products, as well as critical care illness riders on life insurance policies, attest to the industry’s continuing creativity, he said.
Mike Doughty, president and general manager with John Hancock, said the need for LTCi was “so real and just getting bigger and bigger.”
Baby boomers, born between 1946 and 1964, number about 87 million people. The first of these began retiring in 2011, when those born in 1946 turned 65.
While demand for LTCi seems assured, Kneeland said the industry needs to do more to keep successful producers selling long-term care products and growing the LTCi market.
Long-term care isn’t covered by Medicare – although many people mistakenly think it is – and spotty coverage that exists is administered through the state Medicaid program, but only if a long-term care patient qualifies.
Kneeland and Doughty were among five LTCi panelists who spoke during a session at the annual conference of the American Association of Long-Term Care Insurance in Kansas City.
The session covered a range of topics and fielded questions from agents and advisors who had come to hear the speakers and from hundreds of other agents following the session via the Internet.
Scott McKay, senior vice president and chief information officer of Genworth, one of the nation’s biggest LTCi carriers, said that improving the distribution of LTCi provides the other half of the equation to a healthy market.
More agents and advisors are thinking about how to reach and craft LTCi solutions for “any number of people,” McKay said.
“Expansion in the number of people selling long-term care is important too,” he said. In many ways, long-term care is just as important as life insurance but there are 10 times more agents selling life insurance than there are selling long-term care coverage, he said.
Baby boomers, who are retiring at the rate of 10,000 people a day for the next decade at least, will fuel that need for protection either through stand-alone LTCi coverage or through long-term care riders.
Doughty also denied rumors that John Hancock was preparing to abandon the LTCi market. With sales up about 25 percent in the first quarter of this year, and the company developing a stand-alone LTCi product, the market has demonstrated its demand for coverage, he said.
The LTCi executives said that the industry is in a unique place in terms of its history because so many people will need some form of long-term care coverage. It is the first time such a large swath of the population moves into retirement.
Once in retirement, people are living longer than they ever have in the past.
People “need us to guide them along the way,” said Steve Sperka, vice president of the long-term care department with Northwestern Mutual. Long-term care, he said, “is the biggest risk to their financial security.”
As agents hone their sales strategies to sell more LTCi with the hopes of seeing a market rebound, the top underwriters are also developing LTCi products that serve a need and deliver profitable growth to companies that “manufacture” the coverage.
“We need to get product design right,” Doughty said.
Public policy experts agree that private long-term care insurance has a role to play in protecting the well-being of older Americans. The more the private sector can provide long-term care coverage, the less taxpayers will have to pay to provide long-term care.
Health care policy experts advocate a robust public program to cover long-term care since there are not enough private insurers to provide the coverage, nor would private insurers be able to offer coverage at an affordable price.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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