Analysts: LTC Hybrid Policies Will Keep Driving Life Insurance Sales

By John Hilton

It was one of the most stunning data sets discussed during the recent state insurance commissioners' summer meeting in New York City: policies sold with a long-term care rider jumped from 228,000 in 2015 to 461,000 in 2018.

Today, more than 40 carriers are selling these products with a long-term care element, said Steve Schoonveld of the Society of Actuaries. "That's a really robust market," Schoonveld told the National Association of Insurance Commissioners' Senior Issues Task Force.

Agents should keep in mind how flexible the LTC hybrid products can be in meeting several needs for clients. For example, Schoonveld described a 65-year-old couple with a good retirement nest egg, maybe as high as $400,000.

"From an income point of view, they’re not too bad off," he said. "But I think their two biggest risks are the early death of a spouse. And the second, catastrophic health and long-term care expenses, of course.

"What should their advisor tell them? This is just one of many examples where hybrid products have become kind of dual all-purpose products."

Strong Growth

A team of SOA analysts presented an LTCi overview using statistics compiled by LIMRA. They included data showing a 14% growth in average annual premium sales.

“This is very much a growing market, the share of the long-term care marketplace," said Mathew Winegar of the SOA. "Eighty-five percent of long-term care sales last year were on the hybrid product shelf, either chronic illness or acceleration of benefits.”

In 2018, combination products represented 27 percent of the overall U.S. individual life insurance market, LIMRA reported.

Task force members seemed especially interested in hybrid policies as a better alternative to straight LTCi, which is failing both consumers and insurers.

A popular product in the 1990s, LTCi was badly underpriced. Many insurers sought, and continue to seek, significant rate hikes to stabilize their books.

For example, Blue Cross Blue Shield of Florida policyholders were notified by mail earlier this year that annual premiums for their coverage will increase by an average of 94 percent through 2021.

From an actuarial standpoint, hybrid policies come with much less volatility for insurers, explained Robert Eaton of the SOA, because they are a blend of a traditional life insurance or annuity with LTC coverage.

'A Stronger Commitment'

The demand is not expected to abate anytime soon, the analysts said. A Lincoln Financial Group survey of clients with at least $250,000 in investable assets revealed that 57% listed future health/LTC expenses as their greatest retirement concern. That far outdistanced the 37% who listed "outliving their savings" as their greatest concern.

But the esteemed place life insurance holds in American culture is the biggest reason LTC is in a revival mode, Schoonveld said.

"Consumers know and value life insurance. They own life insurance protection, whether it’s while they have kids in the house or not, and they have life insurance when they’re retired as well.

"When you elevate the conversation, when you bring long-term care into the conversation with life insurance planning, you end up getting a stronger commitment to dealing with that risk. So it’s allowing advisors to have that conversation."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.