Thursday, August 04, 2011

Survey says: LTCi on the rise

Got an email the other day from Broker World magazine [motto: "You really don't want to see our swimsuit issue"] announcing that they'd published "the industry's most comprehensive Individual Long Term Care Insurance Survey." This was, in fact, the 13th consecutive such polling. My interest piqued, I asked for (and received) a .pdf copy of the article for review. Details on how you, too, can get a copy are at the conclusion of this post.

In the event, I turned to our resident LTCi guru, Herman Bruns, for assistance in noodling through the article (which ran to 28 pages). We were primarily interested in the first 8 or so, which digested and analyzed the results, which were based on the responses of the 18 carriers which participated (out of only 25 companies that market LTCi in any serious way). The results were interesting, but there were only a few real "surprises."

First, overall sales of LTCi increased last year; it's estimated that the industry sold about 6% more policies than in 2009, with a corresponding 10% increase in premium dollars. This tracks with our own experiences: as Boomers (and immediate pre-Boomers) hit their senior citizenship, there's an increased awareness of the need for these plans.

Claims data was even more interesting: total claims hit over two-and-a-half billion dollars. Of these, home health care (and adult daycare) accounted for about 40%, nursing home care a tad under that, and assisted living facility-related claims came in under 25%.

One reason cited for the near-equal distribution of home health and nursing home claims is the large number of older policies, which typically pay only for the latter; as these "age off" the books, look for that distribution to be more home health-weighted.

We're big fans of the Partnership Program; the study found that, had this program been fully implemented in all 58 states, over two-thirds of the plans sold would have been Partnership compliant.

We're not such big fans of the newly-minted CLASS Act, but the article claims that it's "stimulating workplace sales" as more front-line workers become aware of the importance of long term care coverage. This may also explain the apparent shift toward less expensive product designs (no doubt underscored by John Hancock's recent, and highly publicized, rate increase on many existing plans).

Herman and I were both rather startled by this chart:

The top two carriers held 54% of the market; both of us expect this to change as the aforementioned John Hancock reaps the results of its rate hike (which is not to say that it was unjustified, or even necessarily a "bad thing"). But what really had us scratching our heads was who held the #3 slot: Northwestern Mutual. This carrier, while financially solid as a rock, is not known for price competitiveness, and we marveled at its much-higher-than-expected results.

While it's tempting to label LTCi as "insurance for old people," the average issue age continues to hover at around 58 - not exactly ancient. That makes sense, of course: one's old enough at that point to have accumulated enough assets to be worthwhile protecting, yet young enough that the premiums aren't a huge drag.

Finally, the buyers' "gender gap" was surprising:

"58 percent of buyers are women, but 71 percent of single people who buy are female."

This makes sense, as well: like it or not, there's a much greater likelihood that a widow's going to need long term care than a widower (lot's more of 'em).

Obviously, there's a lot more information in the article itself:

"The complete findings have been published in Broker World Magazine's July 2011 edition. To receive a free, no obligation subscription to Broker World Magazine, compliments of DAI, please click here."

[Hat Tip: Dean Dumond]
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