By Cyril Tuohy
An estimated 300,000 Americans will buy a traditional long-term care insurance (LTCi) policy or a combination LTCi policy in 2015, with a potential collective payout of as much as $5 billion, according to the American Association for Long-Term Care Insurance (AALTCI).
Combination LTCi policies include life insurance and annuities with long-term care insurance riders.
“The maximum potential benefit value for just 2015 new sales will equate to about $5 billion in future benefit payments for home care services,” said Jesse Slome, AALTCI executive director.
Slome said about 8 million Americans are covered by some form of private LTCi benefits. Although sales of “pure-play” LTCi products have declined with LTCi carriers raising prices, sales of life insurance policies and annuities with long-term care benefits have been going up.
“For the first time, we project annual sales of the newer options will equal and quite possibly surpass sales of traditional long-term care insurance policies,” Slome said in a news release.
Benefits paid by the nation’s LTC insurers amount to about $20.5 million a day. In 2013, long-term care insurers paid out $7.5 billion in claims.
Earlier this year, several long-term care executives pointed to robust demand for long-term care as the nation’s baby boomers retire and the World War II generation before them lives longer because of better health care.
“By 2032, insurers expect to pay out in excess of $34 billion as today’s 60-year-old policyholders reach their 80s,” Slome said.
The number of Americans requiring help with daily living at home is expected to more than double to 27 million by 2050 from 12 million today, said Margaret Haynes, chief operating officer of the home health care franchise Right at Home.
Though demand for private LTCi is assured, it’s not clear that insurers are all that good at profiting from the insurance line.
Many carriers 20 years ago underwrote LTCi too cheaply as they had little long-term care claims history to analyze and price coverage profitably.
As a result, many carriers faced billions of dollars in losses as the cost of providing care increased. (In some states, nursing home care can cost as much as $80,000 a year.)
The result was a pullback from the long-term care market and price increases as the remaining carriers sought to cover their costs.
The AALTCI estimates the total maximum potential benefit value to all holders of LTCi policies will approach $2 trillion this year.
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 email@example.com.
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