I recently returned from a national long-term care insurance conference.
I noted the mood at this year’s conference seemed a lot less pessimistic about the long-term care insurance (LTCi) industry than it was last year.
In 2014 we saw continued poor press coverage of LTCi. Media gave mostly inadequate, usually negatively slanted, and sometimes incorrect explanations of LTCi rate hikes, with little advice on constructive ways to ameliorate them. New sales of traditional LTCi decreased. We saw higher premiums, tighter underwriting, and LTCi carrier withdrawals. 2014 was the worst year I can remember for LTCi in my 25 year-long career.
In short, the LTCi market just couldn’t get any worse than it was in 2014.
At the conference I learned that there were more legitimate reasons than my senses alone, to be hopeful about the future of LTCi. While my observations are based on anecdotal experience, it was very reassuring to learn that actuaries agree with what I think most full-time LTCi marketers observe.
Here is why there’s cause for optimism about LTCi:
The problem of who will provide LTC and how to pay for it is not going away. In fact, it’s like a freight train coming at us.
The LTCi market is now expanding, no longer contracting; two new LTCi carriers are in the process of entering the LTCi market.
In the news you will now find plenty of stories advising people that Medicare cannot and will not pay for LTC. You will also find articles about looming budget shortfalls and cutbacks. You will find stories graphically describing the sacrifices families make to provide care for loved ones who don’t own LTCi. You will find stories about our rapidly aging population, lack of caregivers, and impending Alzheimer’s epidemic. After all these years, most journalists still have scant understanding of how LTCi works; LTCi is seldom mentioned in news stories and still doesn’t get the accolades it deserves. But all other indications look good for the future of LTCi.
In his general session presentation at the ILTCI Conference, Roger Loomis, an actuary with ARC (Actuarial Resources Corporation) explained why I believe my suspicions about LTCi’s brighter future are correct. Mr. Loomis’s presentation was about the actuarial outlook on the stability of current LTCi rates. He made several key points. Higher LTCi prices are obviously more stable. The industry has now had time to learn and benefit from its experience. The LTCi industry has more data to support pricing assumptions, less risky product designs are being offered, skill at managing LTCi is better now, and there are better modeling tools. Mr. Loomis used reporting from seven large insurers who have been in the LTCi market continuously for at least 15 years to back up his statements. He concluded that LTCi presently sold has a relatively low (approximately 12%) probability of a rate increase, due to near rock-bottom lapse and interest rate assumptions, plus other factors.
Anyone wanting the slides from Roger Loomis’s presentation should email me at honey@honeyleveen.com.
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I agree on all points, Honey!
There is considerable optimism this year. The remaining carriers have shown a commitment to the LTCI market, and why shouldn’t they? The demographics are in their favor, and their competition has fled. But, as we’ve said before, don’t count out the possibility that other insurers won’t be coming back. All it will take is a return to higher interest rates and we’ll see those on the sidelines jump back into the pool. As you’ve noted, at least two companies are returning to LTCI.
It is unfortunate how frequently and hysterically rate increases are treated by the media. Journalists have the opportunity to speak with LTCI Specialists– professionals who do this for a living– and do a much better job fact-checking their stories. Why they don’t is anyone’s guess.
Keep up the good work!
Stephen D. Forman, CLTC
@ltcassociates
Thanks for reading and taking the time to comment!