LTC Bullet: State of the LTCI Industry—2018

Thursday, September 13, 2018


LTC Comment: Don’t believe everything anything you read in the media. Count on this annual report for the truth about long-term care insurance, after the ***news.***

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LTC Comment: “The 2018 Milliman Long Term Care Insurance Survey is the 20th consecutive annual review of long-term care insurance (LTCI) published by Broker World magazine. It analyzes the marketplace, reports sales distributions, and details available products.”

Subscribers can find this article, authored by actuaries Claude Thau, Allen Schmitz, and Chris Giese, in Broker World’s July 2018 issue here. Purchase a .pdf of the full survey here. To whet your appetite for more, here are a few items that stood out to us:

“State Farm discontinued stand-alone LTCI sales in May 2018, hence is no longer included in the Product Exhibit.”

“The 17 carriers reported sales of 70,080 policies … with on-going premiums ($181,956,656 of new annualized premium … ) in 2017, compared to our 2016 reported sales … of 94,353 policies ($225,838,660 of new annualized premium), a 26 percent  drop in the number of policies and a 19 percent drop in the amount of new annualized premium.”

“Six insurers (three in the Product Exhibit and three others) sold more premium than in 2016 and five sold more policies.”

“Mutual of Omaha and Northwestern reversed position as the top two carriers, combining for more than half of the new sales in terms of premium.”

“For the third straight year (and 3rd time ever), our participants’ number of inforce policies dropped, this time by 5.1 percent after 0.3 percent (2016) and 0.2 percent (2015) drops previously.”

“Nonetheless, year-end inforce premium increased 6.0 percent in 2017 (2.9 percent in 2016). Inforce premium increases from sales, price increases, and benefit increases (including FPOs), and reduces from lapses, reductions in coverage, deaths, and shifts to paid-up status for various reasons.”

“Participants’ individual claims rose 6.1 percent and group claims rose 10.3 percent. Overall, the stand-alone LTCI industry incurred $11.1 billion in claims in 2016 based on companies’ statutory annual filings, raising total incurred claims from 1991 through 2016 to $118.9 billion. … This compares with $9.5 billion of incurred claims in 2015, a 14 percent increase.  Combo LTC claims are in their infancy and amounted to $5.9 million. The claim figures are even more startling considering that only 4 percent of 7 million covered individuals were on claim at the end of 2016.”

“Only 59.0 percent of applications resulted in active policies. This low success ratio contributes to financial advisors’ reluctance to recommend that clients apply for LTCI.”

“Recently priced policies are based on assumptions that rely on far more credible data, hence premiums should generally be more stable.”

“Despite the anticipated more stable pricing, many financial advisors presume that currently-issued policies will face steep price increases.  It is important to educate them that assumptions underlying current market pricing should produce a lower chance of needing a rate increase.”

“‘Combo’ policies (LTCI combined with life insurance or annuity coverage) increased to 256,000 sales totaling more than $4 billion of new premium in 2016 (88 percent life; 12 percent annuity) much of which was from single premium sales, compared to $3.6 billion in 2015.”

“During the course of 2017, the brokerage worksite market reduced to a sole insurer.  However, three new unisex offerings appear likely by the end of 2018.”

“For the nine insurers which reported individual claims for both 2017 and 2016, claim dollars rose 6.1 percent, despite a 6.3 percent decrease in inforce policies.”

“The LTCI industry has had a much bigger impact than indicated above, because a lot of claims are paid by insurers that no longer sell LTCI.”

“Individual claims shifted significantly away from nursing homes (from 37.4 percent to 32.1 percent) to ALFs (31.2 percent to 35.3 percent).” 

“Some people may have expected that ALF claims would be less expensive than nursing home claims because ALFs cost less per month.  But that has not been the case.”

“Past average claim data understates the value of buying LTCI because the many small claims drive down the average claim. LTCI can provide significant financial return for people who need care one year or longer.  The purpose of insurance is to protect against a non-average result, so the amount of protection, as well as average claim, is important.”

“Worksite business produced 22.0 percent of new insureds (see Table 7), but only 13.9 percent of premium because of its younger issue age distribution and less robust coverage.”

“[T]he average premium per new insured ranged between $2,322 and $2,497 between 2011 and 2016, then surged to $2,596 in 2017.”

“The average issue age rose to 56.7, the highest since 2013.”

“Five percent compounded for life, which represented 56 percent of sales in 2003 and more than 47.5 percent of sales each year from 2006 to 2008, now accounts for only 1.5 percent of sales. Simple five percent increases were 19 percent of 2003 sales, but are now 0.2 percent of sales.” 

“Partnership Programs When someone applies to Medicaid for long term care services, states with Partnership programs disregard assets up to the amount of benefits received from a Partnership-qualified policy. Partnership sales were reported in 44 jurisdictions in 2017, all but Alaska, District of Columbia, Hawaii, Massachusetts, Mississippi, Utah, and Vermont, where Partnership programs do not exist.  Massachusetts has a somewhat similar program (MassHealth).”