LTCi market maturing as more prospects need it

The long-term care insurance market in 2025 is maturing and robust but still needs a large amount of sales to help meet the need that is out there.

That was among the takeaways from a look at what the coming year will bring to the LTCi market during a recent webinar from the American Academy of Actuaries.

Alternatives to traditional stand-alone LTCi continue to grow in popularity, said Aaron Wright, vice chairperson of the academy’s Long-Term Care Committee.

“The ability to leverage other risks with long-term care has become an important consideration for insurers and insureds,” he said, describing a shift toward combination products in the LTCi marketplace. A 2022 report by the National Association of Insurance Commissioners said about 6 million stand-alone LTCi policies are in force in the U.S., and about 1 million combination policies are in force. But sales of combination policies have been outpacing stand-alone LTCi policies since 2015, according to LIMRA.

The increasing price of stand-alone LTCi along with the “use it or lose it” provision of the coverage are two of the drivers of combination policy sales, Wright said.

LTCi accounts for only about 8% of total private spending on long-term care, he said. Of the $468 billion spent on long-term care in 2021, public spending accounted for $334 billion while $134 billion came from private spending. Out-of-pocket spending makes up the largest percentage of private spending on care.

The need for long-term services and support will continue to grow, Wright said, as all the 73 million baby boomers will pass the age of 65 by 2030. About 70% of those over 65 will develop severe care needs.

Wright listed several areas of potential uncertainty and their future impacts on the LTCi markets. They include:

• Public long-term service and support options.
• Pharmaceutical solutions such as dementia research and GLP-1 drugs.
• Interest rates.
• Artificial intelligence, which can provide assistance to care recipients or can improve analytics.
• The long-term impact of COVID-19.

Management of older LTCi policies is a challenge

Policyholder engagement and management of existing older LTCi policies are a challenge, said Laurel Kastrup, a member of the academy’s Long-Term Care Committee. Some opportunities for carriers to manage older LTCi policies, she said, include:

• Rate increase management. A common option carriers are leveraging on older blocks of business.
• Claims management. Carriers are starting to manage policyholders’ care after they go on claim.
• Population care management. Carriers are looking at managing policyholders in the pre-claim period.
• Divesting the block. Acquisitions and carve-outs have a limited buyer pool.

LTCi carriers also may attempt to lower the cost of care by assisting policyholders to age in place, Kastrup said. Carriers can develop a wellness strategy to prevent or delay claims.

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].