LTC Bullet: State of the LTCI Industry—2019

Friday, July 26, 2019


LTC Comment: Read highlights from the Broker World’s annual long-term care statistical tour d’ force below.


LTC Comment: “The 2019 Milliman Long Term Care Insurance Survey is the 21st consecutive annual review of stand-alone long-term care insurance (LTCI) published by Broker World magazine. It analyzes the marketplace, reports sales distributions, and describes available products including group insurance.”

Subscribers can find this article, authored by actuaries Claude Thau, Allen Schmitz, and Chris Giese, in Broker World’s July 2019 issue here. To whet your appetite for more, here are a few items that stood out to us:

  • “Eleven carriers participated broadly in this survey. Four others provided sales information so we could report more accurate aggregate industry individual and multi-life sales. From these submissions, we estimated total industry production.”

  • “The 15 carriers reported sales of 56,288 policies and certificates (“policies” henceforth) with new annualized premium of $171,537,644 (including exercised FPOs [Future Purchase Options) in 2018, compared to 2017 restated sales of 64,800 policies ($181,506,770 of new annualized premium), a 13.1 percent drop in the number of policies and a 5.5 percent drop in the amount of new annualized premium. As noted in the Market Perspective section, sales of policies combining LTCI with other risks continue to increase.”

  • “With FPO elections included in new premium, Northwestern garnered the number one spot in new sales. Mutual of Omaha was a strong second and had a large lead in annualized premium from new policies sold. Together, they combined for 57 percent of new premium including FPOs and 52 percent of new premium excluding FPOs.”

  • “Participants’ individual claims rose 5.9 percent. Overall, the stand-alone LTCI industry incurred $11.0 billion in claims in 2017 based on companies’ statutory annual filings, raising total incurred claims from 1991 through 2017 to $129.9 billion.”

  • “The average processing time in the industry was eight percent faster in 2018 than in 2017. Nonetheless, active policies resulted from only 58.8 percent of applications, even lower than 2017’s record low of 59.0 percent.”  

  • “The stability of current prices bears no resemblance to the past instability because today’s prices reflect much more conservative assumptions based on far more credible data and low investment yields. Unfortunately, many financial advisors presume that new policies will face steep price increases. It is likely to take a long time before the market becomes comfortable that prices are stable.”

  • “Looking at the total LTCI market, stand-alone policies accounted for 20.0 percent of the 2017 policies sold, policies with extensions of benefits (EOB) accounted for 11.2 percent and policies with accelerated death benefits but no EOB accounted for 68.8 percent.”

  • “Claimants rarely challenge insurer claim adjudications. Since 2009 (varies by jurisdiction), if an insurer concludes that a claimant is not chronically ill, the insurer must inform the claimant of his/her right to appeal the decision to independent third-party review (IR). The IR determination is binding on insurers. As shown in our Product Exhibit, most participants have extended IR beyond statutory requirements, most commonly to policies issued prior to the effective date of IR. At least four participating insurers report never having a request for IR. Four other insurers have reported a total of 72 IR requests resulting in the insurers’ denials being upheld more than 90 percent of the time.”

  • “The average premium per new life ($2,544) is 18 percent less than we would have quoted including FPOs in the numerator. Three insurers reported average premiums for new insureds below $1,700, while five insurers were over $2,800. The average premium per new buying unit (counts a couple only once) was $3,598. The lowest average new premium (including FPOs) was in Puerto Rico ($1,960), followed by Kansas ($2,448), while the highest was in New York ($4,243), followed by Connecticut ($3,886). Due to rate increases, FPO elections and termination of older policies, the average inforce premium jumped to $2,168, 3.0 percent more than our restated 2017 figure.”

  • “The average issue age was 56.6.” 

  • “The average notional benefit period slightly increased from 3.73 to 3.74. Because of Shared Care benefits, total coverage was higher than the 3.74 average suggests. For the first time, a single benefit period (3-year) accounted for half the sales.”

  • “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 two percent of sales. Simple five percent increases for life were 19 percent of 2003 sales but are now only 0.4 percent of sales.”

  • “The 77.8 percent of accepted applicants who purchased coverage when their partners were declined was the highest over that time period.”

  • “Fifty-five percent (55.1 percent) of all buyers were female, the lowest percentage since 2012.” 

  • “Partnership sales were reported in 44 jurisdictions in 2018, 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).”

  • “Ten insurers contributed application case disposition data to Table 21. In 2018, 58.8 percent of applications were placed, including those that were modified, a new low slightly below 2017’s previous record low of 59.0 percent.”