By Cyril Tuohy
The American Association for Long Term Care Insurance (AALTCI) forecasts long-term care insurance (LTCi) premium growth of between 8 and 10 percent in 2015 over last year, and policy sales are expected to grow by 3 to 5 percent over last year.
Jesse Slome, AALTCI executive director, said the 2015 projections are a welcome reversal from the “double-digit sales declines” experienced by LTCi carriers in 2014.
Slome also said in a news release that 2015 sales would be even higher if more financial advisors and agents re-entered the long-term care insurance marketplace.
“I don’t see that happening over the short term in 2015 but it is good to see some major insurers are investing heavily in trying to rebuild distribution for the product,” he said.
The LTCi market is in the midst of transition. The question isn’t whether the LTCi market is here to stay, or even whether it will grow. The question is which direction will it take?
Many insurance carriers fled the market several years ago, having experienced losses on policies issued before 2002 as long-term care costs rose. Other carriers pulled back from either the individual market or the group market.
Remaining carriers raised prices to stay profitable, and carrier executives are preparing to launch new products to take advantage of a new market cycle.
At the same time, carrier executives say the industry needs to do more to keep successful advisors selling long-term care insurance coverage, and to attract new producers into the ranks.
“Expansion in the number of people selling long-term care is important too,” said Scott J. McKay, senior vice president and chief information officer of Genworth Financial at the AALTCI annual meeting in Kansas City last spring.
LTCi policies are, in some ways, more important than life insurance policies for some policyholders, yet there are 10 times more agents selling life polices than there are agents selling LTCi, he also said.
Carriers committed to the LTCi market — which is valued at about $11 billion in premiums covering about 6.9 million policyholders — have sought to grow the market by making LTCi policies more flexible.
When LTCi was first offered decades ago, most plans covered only nursing home care. Today, many LTCi policies offer flexible care options and more consumer protections.
In addition, the industry has found ways to offer long-term care riders on life insurance policies and annuities whereby the LTC benefit payment — a living benefit — comes at the expense of a policy’s cash value or death benefit.
“If adding a benefit like LTC gains traction for life insurance sales, then considering the number of life insurance agents, we expect many more Americans will have some form of long-term care protection in place at the end of 2015,” Slome said.
The long-term future of the LTCi market seems assured as policy experts agree that private LTCi has a role to play in protecting the well-being of older Americans, millions of whom are retiring and getting older every year.
A report issued by the American Council of Life Insurers (ACLI) in November found that by 2020 there will be an estimated 2.46 million American age 85 and older. By 2050, the number of Americans 85 and older will have ballooned to 7.09 million.
At the same time, the number of employed adults who contribute most in taxes will be shrinking, said Andrew Melnyk, vice president and chief economist for the ACLI.
In 2020, he estimates there will be 2.4 employed adults per retiree. By 2050, there will only be two employed adults per retiree.
The more the private sector can provide long-term care coverage, the less taxpayers will have to pay to provide long-term care through Medicaid, Genworth CEO Thomas J. McInerney, said before a gathering of the Intercompany Long-Term Care Conference last March.
“The private market can’t cover everybody, but the more LTC insurance policies that are issued, the less pressure on Medicaid budget and other entitlement spending in the future,” he said.
Claims incurred by the LTCi market amounted to $7.7 billion in 2013, according to data from the National Association of Insurance Commissioners.
Cyril Tuohy is senior writer for InsuranceNewsNet. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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