LTC Bullet: New LIMRA Study on LTCI Trends and Outlook

Friday January 18, 2002


***Important Reminder: Check out the Centerís new "LTC Week in Review" feature published every Monday afternoon in our website donor-only zone. Titles in next Mondayís edition include: "Nursing Homes Flounder, Residents Suffer," "Predicting the Future of LTCI," "What if 'All Health' Broke Loose?," "," and "Dodge or Moderate the Flu and Colds." Details on how to access the donor-only zone are available at See you there!***

The Life Insurance Marketing and Research Association (LIMRA) recently published a study titled "Long Term Care Insurance: Trends and Outlook." You can read the full report on LIMRA's web site at In the meantime, here are a few excerpts with a comment or two from the Center for Long-Term Care Financing.

"LIMRA surveyed 78 executives in the long-term care insurance industry regarding their outlook for the future of the market. In general, these experts are cautiously optimistic, predicting moderate to strong growth of the product. This report will help companies expand their long-term care insurance marketing strategy, offers insight regarding the likely direction of product and distribution trends, looks at factors that impact the market, and discusses challenges that the industry currently faces." (p. 18)

"Executive Summary

"Experts are cautiously optimistic about the outlook for long-term care insurance (LTCI) and expect moderate to strong growth. The reasons for the optimism are

* The market is untapped.

* The regulatory environment is favorable.

* Persons aged 50 and over are the fastest growing age group.

* The percentage of persons living to age 80 or more continues to increase.

* Public awareness for the need of LTCI is improving.

"The cautions center on these four challenges:

* Developing products that are adequately priced and are profitable

* Introducing too much regulatory change

* Improving product distribution

* Expanding consumer education and communication efforts

"During the 1990s LTCI grew from less than 1 million insured to over 4 million insured. These sales were mainly derived from individual insurance products. In the near term, individual qualified insurance products will continue to be the main source of new sales; however, in the longer term group products are anticipated to also be a major source. The markets that will drive LTCI sales in the future are pre-retirees, married individuals, women, and middle-income households." (p. 3)

"The vast majority of the study participants believe the market is headed for strong to moderate growth driven by a large, growing unmet 'need'." (p. 5)

"The majority of experts questioned predict that individual products will continue to lead sales over the next three to five years. However, when looking further ahead, 40 percent believe that sales of group products will eventually surpass individual, many predicting this will occur in the next five to ten years." (p. 5)

"Over 90 percent of study participants consider individuals in their 50s the ideal target age group for insurance companies."   (p. 7)

"Participants target married individuals over single persons. HIAA found that 70 percent of buyers in 2000 were married."    (p. 7)

"Participants feel women are a better market for LTCI than men. Women reaching age 65 have a greater than 50 percent chance of needing extended care before death." (p. 7)

"Participants find middle-income households the most attractive income group for LTCI. They represent the largest number of households. In addition, financially, these households are prime candidates as they have assets to protect (unlike the lower income market which is more likely to qualify for Medicaid) yet they often do not have enough assets to provide for an extended stay in a long-term care facility (unlike the affluent market)." (p. 8)

CLTCF Comment: The fallacy in the last quotation is commonplace. The truth is that throughout the United States, elderly people who qualify medically for nursing home care, can qualify easily for Medicaid nursing home benefits--without spending down significantly--even when they have median income and assets. People with much higher income and assets can also qualify quickly with advice from a Medicaid estate planning attorney. These facts help to explain the public's perception that the government pays for long-term care. For more on how the middle class qualifies routinely for Medicaid nursing home benefits and the impact this fact has on the marketability of LTC insurance, see "The Myth of Unaffordability: How Most Americans Should, Could and Would Buy Private Long-Term Care Insurance" at

"Three actions that study participants consider the industry could take to gain wider acceptance of the product among producers include: 1. Developing field force training; 2. Fostering better understanding of and comfort with the product; and 3. Simplifying sales and marketing procedures." (p. 9)

"The majority of participants don't anticipate the Internet to be an important source of sales. However, they view it as having at least a moderate impact as a marketing tool." (p. 9)

"Two additional channels may be an important source for LTCI sales: banks and financial planners. Banks, although a natural channel to reach older age groups, have, to date, reported few sales. The other channel is the financial planner. A recent LIMRA study of financial planners found that they believe that long-term care insurance will be one of the fastest-growing products in the coming years." (pps. 9-10)

"The number one marketing challenge continues to be pricing and profitability. Insurers find themselves in a tough situation. This product needs to be a lot of things. As with all insurance products, it must be attractive and affordable for the consumers, yet priced responsibly to avoid unexpected future premium increases. Also, LTCI commissions must be sufficient enough to offer producers an incentive to work harder to sell this little understood, complex product. And, companies must also make a profit. Unfortunately, for most carriers, they must strive to do this with little experience to draw from." (p. 13)

"A recent HIAA study on purchasing behaviors for LTCI underscores the need for increased consumer education. The survey notes that only 25 percent of individuals 55 and over think they or their family would be responsible for long-term care expenses." (p. 13)

CLTCF Comment: The public is not nearly as ignorant as studies like the one cited above suggest. The truth is that most people who ignore the risk of long-term care until too late, can and do qualify for Medicaid nursing home benefits without having to spend down their own assets significantly. The proportion of nursing home costs paid by Medicaid has gone up 10 percent in the past 10 years, while the proportion paid out of pocket has gone down 10 percent. The strongest reason to buy LTC insurance is not asset protection, which is easily obtainable from Medicaid after chronic illness strikes, but rather the ability to purchase quality care in the private market at the most appropriate level. That's what people cannot get from Medicaid, even though they can get Medicaid after the insurable event occurs with few obstacles. Consult the Center for Long-Term Care Financing's web site at for more details.

For further information, contact the LIMRA project directors: Jennifer Douglas at 860-285-7742 or and Anita Potter at 860-285-7847 or