LTC Bullet: Broker World LTCI Surveys
Wednesday, August 29, 2012
LTC Comment: Year after year Broker World magazine has published articles describing the status of the LTC insurance industry. Read the highlights of this year’s updates after the ***news.***
*** We recently received this thoughtful email from Center member Michael B. FitzPatrick of LTC Financial Partners. What an excellent idea to thank some of our most important, industrious and altruistic laborers this Labor Day: caregivers. An excerpt:
“All Americans owe a debt of gratitude to those who work for a living. But what about our caregivers, who selflessly tend the disabled - helping them eat, bathe, go to the bathroom, dress? Our society could not function without caregivers, yet we give them short shrift when handing out thank-you's. To rectify this, LTC Financial Partners, with offices in Morristown, proposes a Labor Day token of thanks.” ***
*** SPOTLIGHT ON: The Center for Long-Term Care Reform’s “Almanac of Long-Term Care” is a compendium of information on all aspects of long-term care service delivery and financing organized chronologically by subject for quick and easy access. The “LTC Almanac” conveniently provides information that will give you a competitive advantage in your long-term care profession. Members can access the “LTC Almanac” by clicking here. If you need your user name and password, or are not yet a member, contact Damon at 206-283-7036 or email@example.com for quick access to The Zone and the LTC Almanac. ***
*** If you value the content you receive in these LTC Bullets, please consider supporting your Center for Long-Term Care Reform. Your contribution not only gets you all of our LTC Bullets newsletters, it gets you access to our password-protected Members-Only Zone and members-only emails designed to keep you on the forefront of LTC knowledge and supports our extensive program of speaking, publication, education and advocacy in favor of sensible long-term care planning and policy. For further information on membership benefits, please click here. It’s easy to join our mission; just click here. If you have any questions, please contact Damon at 206-283-7036 or firstname.lastname@example.org. ***
LTC BULLET: BROKER WORLD LTCI SURVEYS
LTC Comment: We thank editor Sharon Chace and Broker World magazine for permission to republish the following “highlights” from articles in their July and August, 2012 issues. These highlights will give you key information about the status of the individual and worksite LTC insurance markets.
As explained on its website, “Broker World is the only national insurance magazine founded, focused and edited to specifically address the brokerage marketplace and the unique informational needs of independent life and health producers who select the products best suited to their clients' needs from a variety of companies and marketers.”
To subscribe or advertise in the magazine, contact Broker World here.
Special thanks are also due to the LTC insurance experts and actuaries who conducted the research and prepared these reports: Claude Thau of Target Insurance Services and Dawn Helwig and Allen Schmitz of Milliman, three of the field’s undisputed leading lights.
2012 Long Term Care Insurance Survey
The 2012 Long Term Care Insurance Survey is the 14th consecutive annual review of long term care insur29ance (LTCI) published by BROKER WORLD magazine. The survey compares products, reports sales distributions and analyzes the changing marketplace. . . .
Highlights from This Year’s Survey
• The 14 carriers that contributed statistical data to this survey sold 195,288 policies for $453,530,347 of new annualized premium in 2011 (plus $5.5 million from 123 single premium policies), 1.3 percent more policies for 7.1 percent more annualized premium in 2011 than in 2010, not counting single premium cases.
• We estimate that the entire stand-alone LTCI industry sold 231,100 policies (2.9 percent fewer than in 2010) for $537.3 million of annualized premium (1.4 percent more than in 2010).
• Genworth, Prudential and Unum collectively sold true group LTCI to 120,920 new* insureds, resulting in $64,979,000 of new annualized premium, not including exercised future purchase options or other additions to in-force certificates. Unum's discontinuation of group LTCI sales to new cases should cause 2012 average premium per certificate to be much higher than 2011 ($537 per certificate). Because of its many core/buy-up programs, Unum sold 3.6 times as many certificates as Genworth and Prudential combined, but only 20 percent more premium.
*Note: True group sales figures include transfers of cases issued by other insurers in the past. Hence the amount of sales can change markedly from year to year, and reported new sales may greatly exceed the number of new insureds for the industry.
We are aware of only 20 insurers currently selling individual LTCI and only two insurers in the true group guarantee issue market. Among current carriers, market share is shifting tremendously.
• Twelve participant companies reported individual (including multi-life) claims for 2011 and five reported true group claims. Total claim payments by these carriers rose to $2,653,456,000 for 2011, 13 percent over apples-to-apples 2011 figures, whereas their total in-force premium rose only 7 percent, demonstrating the “tip of the iceberg” nature of LTCI claims. Those companies have paid $18,591,242,000 in claims paid since inception, an 18 percent increase over what they had paid through 2010.
• The LTCI industry has made a much bigger difference than the above numbers indicate because a lot of claims are paid by insurers who no longer sell LTCI.
According to the NAIC’s report for 2010 (the most recent report available when this was written), the industry incurred more than $6 billion in claims, boosting the industry to more than $55 billion of claims incurred since inception.
2012 Analysis Of Worksite LTC
Long term care surveys have been published in Broker World magazine annually since 1999. This is the sixth year (since 2006) that this worksite-specific analysis has been published.
The worksite market consists of sales made with discounts and/or underwriting concessions to groups of people based on common employment. These sales are generally made through employers with fewer than 500 employees. They are distinguished from “true group” sales in that they do not offer guaranteed issue.
The analysis herein does not include group cases and combo products. (Also called linked benefits, combo products pay meaningful life insurance, annuity or disability income benefits in addition to LTCI.) However, worksite sales can use either group policies with certificates or individual policies; and individual policies and group certificates are collectively referred to as policies herein.
The July 2012 issue of Broker World magazine reported on the overall LTCI market. Its policy exhibit displayed products available in the worksite market, some of which are sold only in the worksite market.
This article compares worksite sales reported in the survey to total sales (other than single premium sales) reported in the survey and compares detailed distributions of worksite policies to both individual LTCI policies that are not worksite policies and to the total individual market. References are solely to the U.S. market and exclude the election of future purchase options unless specifically indicated.
The data may under-report worksite sales because, as noted below under “Market Share,” some worksite sales may not be identified as such in an insurer’s administrative system.
Many LTCI professionals look to the worksite market as an opportunity to resume industry growth. There is a significant opportunity, and sales should increase. There will be a short term artificial boost because a major competitor which sold “true group” LTCI in the small employer market has discontinued selling LTCI. The shift in such business from “true group” to worksite is likely to create an unsustainable near-term growth rate. Furthermore, it is appropriate to be cautious in projecting growth in worksite LTCI sales because young workers have higher priorities for their take-home pay than buying LTCI, and today’s higher LTCI prices dampen penetration rates.
About the Survey
Eight of the 12 insurers whose products are displayed in the 2012 LTCI Survey provide discounts and/or underwriting concessions for worksite LTCI and all contributed data to this article. The other four insurers might make incidental worksite sales but do not identify worksite as a market. In addition to the displayed companies, LifeSecure, Prudential and Northwestern reported worksite sales, and Northwestern also contributed worksite sales distributions.
Of the insurers which sold worksite business in 2011, only Berkshire (no longer selling LTCI), MetLife (stopped selling in 2010 but issued a few residual policies in 2011) and New York Life did not report their worksite sales to this analysis. We estimate the insurers that reported worksite sales and, thus, were included in this survey, represent 80 percent of the 2011 worksite market in terms of new annualized premium. Those that contributed to the sales distributions below represent two-thirds of the 2011 worksite market.
In 2011, these carriers sold 16,000 worksite policies for nearly $30 million of new annualized premium (more than a 50 percent increase over their production the previous year). Part of the increase is due to a shift from MetLife (which sold a lot of worksite business in 2010) to this year’s participants.
These carriers’ worksite LTCI sales accounted for 6.0 percent of the new annualized premium sold in 2011. If we were able to include worksite sales from Berkshire, MetLife and NYLIC, worksite annualized new premium would be approximately 7.2 percent of the total industry production.
The 7.2 percent of total industry production translates to approximately 8.5 percent of new insured lives that resulted from the worksite market in 2011.
The average premium for worksite business rose 5 percent to $1,731 in 2011 and was 74 percent of the average premium for non-worksite sales.
Eighteen percent of the in-force annualized worksite premium and lives resulted from new sales. By comparison, for the non-worksite market, only 8 percent of in-force premium and 6.4 percent of in-force lives resulted from 2011 sales.
Market share varies significantly in the worksite market compared to the total market.
Issue age and maximum daily benefit are considerably lower in the worksite market and more than one-third of the policies do not have a benefit increase feature.
Only about 40 percent of the worksite policies meet qualifications for the State Partnerships for Long-Term Care program. Since the worksite market provides an avenue to reach people who are most likely to benefit from partnership programs, the industry would do well to find ways to increase the percentage of policies that qualify.
The worksite market is more successful in insuring both members of a couple as well as single people.
Preferred health discounts are less common in the worksite market because of simplified underwriting.
Limited pay policies are much more common in the worksite market.