More Consumers Hanging On To LTCi Coverage

WINDSOR, Conn., April 27, 2016—More consumers are hanging on to their long term care insurance (LTCI) policies, according to the latest persistency study of U.S. long term care insurance by LIMRA and the Society of Actuaries (SOA).

The study is based on data from 20 companies with about 19 million covered lives; about 64 percent of the insureds had individual coverage and 36 percent had group coverage.

The study found the percentage of policies voluntarily lapsed was 3.6 percent during the years 2008-2011.  This is 30 percent lower than when the study examined experience data from 2002-2004.

“This is the first study in which we placed great emphasis on separating those policies that voluntarily lapsed with those terminated because the policyholder died,” said Marianne Purushotham, corporate vice president and research project director for LIMRA.  “We believe this approach will better serve study participants and the industry as a whole in allowing for more in-depth examination of the data and results.”

As expected, voluntary lapse rates for first-year policies is highest.  Analysis of the data found first-year voluntary lapse rates to be close to 11 percent; by year six it was down to 3 percent and then remained steady at 1.5 percent for the duration of the policy.  The study found female policyholders less likely to lapse their individual LTCI policy in early policy years than men but more likely to lapse in later policy years.

“We believe that women understand the value of the policy more than men as they are typically the ones taking care first of their own parents and then of their husbands who tend to get sicker and die earlier,” said Purushotham.  “They recognize they will need the policy when they need assistance.  Prior LIMRA research has shown consistently that women are more concerned about affording long term costs than men (45 percent vs. 34 percent).”

Consistent with prior studies, the results from 2008–2011 show that LTCI products with limited benefits — either in terms of a number of days or a dollar amount — exhibit higher rates of voluntary lapse than plans with unlimited benefits.

“Historically these studies have shown that policies with richer benefits are considered more valuable by their owners and have proven to be less likely to lapse than those with more limited benefits” noted Purushotham.

Today LIMRA collects 90 percent of relevant policyholder experience data for individual life insurance and annuity products. LIMRA has been conducting policyholder experience studies for more than 50 years and has partnered with the Society of Actuaries to conduct persistency studies on individual life insurance, long term care insurance, disability insurance and annuities for more than 20 years.