National Guardian Life To Jump Into LTCi Market

While insurers have been exiting the long-term care insurance market for the past several years, one company is making plans to jump in.

National Guardian Life will take the plunge into the LTCi market, with a policy slated to debut in the first quarter of 2016.

LTC expert James R. Glickman confirmed the surprising development in an email to InsuranceNewsNet. Glickman, who is president and CEO of LifeCare Assurance, has been working with the carrier on the entry.

Unless another carrier beats the company to the punch, National Guardian will be the first to make the plunge in years. Insurers have been fleeing the business for several years due to pricing and other concerns, leaving comparatively few insurers still actively writing policies in the U.S.

National Guardian is an independent mutual life insurance company based in Madison, Wis. Founded in 1910, it sells pre-need, final expense and group accident and health insurance, and has an A- rating from A.M. Best Company, according to the company website.

Glickman alluded to — but did not identify — the carrier’s plans during a presentation he made in a workshop at last week’s annual meeting of National Association of Independent Life Brokerage Agencies in Orlando.

“You may have heard that there is a new carrier jumping in,” he said, contributing to the buzz that was already circulating. “Maybe that (entry) will be the spark that the industry needs to get it to start looking at the LTCi market again.”

“I don’t know that this will happen (right now), but it certainly will happen over time, and I can virtually guarantee you that (it will happen) when interest rates start drifting up again.”

Why enter now?

Some brokerage general agents privately expressed disbelief that any company would enter the LTCi market right now. They pointed to the highly publicized departures of several large carriers like Prudential, MetLife and UNUM Group as examples that the business is not expanding.

However, several BGAs broached the name of National Guardian as the possible carrier, and Glickman confirmed it in the email to InsuranceNewsNet later in the day.

Roger Loomis, principal and director for Actuarial Resources Corp., laid out several reasons why insurers might want to enter the market now. He spoke at the same workshop as Glickman.

The prevailing concern is that LTCi is at risk for requiring rate increases in the future, Loomis noted. But while older blocks of LTCi business did have this problem, it may not be the case with new LTCi policies, he indicated.

In fact, “now might be the perfect time to get into the market,” he said.

Pricing of new LTCi policies is based on more conservative morbidity, mortality and lapse rate assumptions than in the past, Loomis explained, noting that these are the key factors that drive LTCi rate increases.

With more conservative assumptions comes less risk of rate increases in the future, he noted.

The higher prices now in effect on new policies should be an indication that today’s LTCi business is more stable than in the past, Loomis said. In addition, the industry has learned from the past, and it has much more data to use to support its pricing assumptions. Also, people in the home office and field have greater understanding of the product. “Given all that, maybe the risk really has gone down,” he said.

Black eyes

A report by the Department of Health and Human Services shows that at least 26 LTCi carriers, many of them national brands, had left the LTCi insurance market between 1996 and 2012. The same report said there were 102 companies selling policies in 2002 but that there were only about a dozen active players “selling a meaningful number of policies” by the end of the decade.

Loomis acknowledged that “a lot of companies got black eyes from this product and so pulled out.” That has contributed to the “bearish attitude about LTCi” of recent years, he said.

But a Society of Actuaries study of six large LTCi carriers that have been in the business for the last 15 years suggests it may be time to reexamine that position. The data shows that pricing assumptions and rates have become more conservative over time, making for a less risky environment in 2014 than in years 2000 and 2007, Loomis said.

Now the rates are a lot higher. In addition, the rates at the different LTCi carriers are closer together than before. The closeness suggests a consensus has developed about risk and what type of premium is really necessary, he said.

Furthermore, modeling suggests that the probability of rate increases occurring is much lower today than in the past. In 2000, there was a 40 percent chance of a rate increase, and in 2007, a 30 percent chance, he said. But in 2014, the modeling shows only a 10 percent chance of rate increase, and the increase amount would be just 10 percent.

“If that is true, why aren’t the carriers coming back in?” someone in the audience asked.

“I think they are emotionally scared,” Loomis said. “But I think we are at an inflection point” and that they will be coming in, he added.

Accuracy in the numbers used in pricing is greater today than previously, so it is much safer for carriers to be in the market now, Glickman said.

The IIR is 25 percent

Current LTCi products are priced with a 25 percent internal rate of return, Glickman pointed out. “There is no other product than any company sells that is anywhere near that kind of return.”

However, he continued, most companies don’t know what the real risk is, and many don’t look at it “because they don’t want to go where others are not going.”

Today’s LTCi rates are roughly 200 percent higher than in the year 2000, Glickman noted. But even with the price increases, the product is “really attractive” and “makes so much sense” for people to use for asset protection.

Glickman predicted that, if agents and brokers are confident the current prices are right, they can still pursue their mission. “This mission is to help people protect themselves from something they don’t know they are supposed to protect.”

InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com.

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