A 2014 study by the RAND Corporation estimated the cost of informal caregiving in the US at $522 billion: “Across America, people spend an estimated 30 billion hours every year providing care to elderly relatives and friends. The cost is measured by valuing the times caregivers have given up in order to be able to provide care.” Those numbers continue to grow in 2017, as the baby boomer generation ages and creates greater demand for long-term care services.
Numbers like this get everyone’s attention, and long-term care (LTC) is a concern that is at once personal, cultural and political. Those of us in the insurance business know there is a solution – one that’s been around for several decades: Long-term Care insurance (LTCI). But what’s happening to sales of LTCI amid these growing concerns and exponentially increasing numbers?
Six leading LTCI companies recorded increased policy sales in 2015 compared to their sales during the prior year according to the American Association for Long-Term Care Insurance. “This is a positive sign as is the fact that one new insurer began selling policies in 2016,” declares Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI). However, according to Slome, overall sales of traditional LTCI continued to decline compared to the prior year. “The number of new policies (lives) sold in 2015 was down around 20 percent.”
The problem, according to Slome, is that, “Consumers we speak with perceive that LTCI protection is expensive, that insurers seek continual rate increases, and they express concern after reading online reports about denied claims.” Though that perception may be mistaken in some ways (the industry paid over $8 billion in claims in 2015, a 4% increase over 2014), the reality is that sales of stand-alone LTC policies have been steadily declining for 15 years. But ignoring the problem doesn’t make it go away.
“Here’s a stunner,” writes Richard Eisenberg for Forbes, “the average American underestimates the cost of in-home long term care by almost 50%,” according to findings in a 2016 Genworth Cost of Care study. Still, in the midst of this growing disconnect between perception and reality there is a bright spot: sales of combination and hybrid products with LTC benefits are on the upswing.
In May 2016 The National Association of Insurance Commissioners (NAIC) teamed with The Center for Insurance Policy and Research to create an exhaustive report: The State of Long-Term Care Insurance: The Market, Challenges and Future Innovations. In their section on LTCI products, they explain the appeal of hybrids in today’s marketplace:
“The hybrid product market has experienced substantial growth at the same time that standalone LTCI sales have collapsed and stagnated. . . . Hybrid products are appealing to customers, with particularly good alignment with consumer attitudes of the baby-boom generation, which now entirely comprises the target market for LTCI products. The products are fairly simple and can be easily explained to consumers. Generally, the customer has already made a decision to purchase life insurance or an annuity contract, and the step of making it a hybrid product is as simple as a choice to add a rider with LTC features. The customer is simply being advised of an optional feature which allows the ability to access his/her death benefit or account value in the event LTC is needed.”
Hybrids continue to evolve into new and better options for consumers, offering an array of innovative features and benefits, including
- Residual Death Benefits
- Inflation Protection
- Return of premium features
- Coverage for permanent and/or temporary conditions
- International Benefits
- Life policy lapse protection while on claim
- Non-forfeiture options which preserve some benefits even if premiums are unpaid
- Skilled nursing home care; adult day care; assisted care; home health care; intermediate care; hospice care
- Family care (see “$522 billion,” above)
- Guaranteed Issue contracts (call us for details on this)
- Payment of benefits in full, through long-term care benefits and/or life insurance death proceeds
Additionally, insureds maintain control of the amount of the payment and enjoy a high degree of flexibility:
- Insureds choose how much of the monthly benefit is received, up to the benefit maximum
- As long as the insured is receiving care from a licensed care facility or service, excess benefit payments that are not needed to pay for care can be used for any other purpose
- Insureds may choose to receive less of the LTC benefit than they are eligible for to preserve their policy benefits, effectively “stretching” the LTC coverage period
With all this flexibility comes a perplexing amount of information and choices. Which means offering your client sound, informed advice about suitable products becomes vitally important.
At Windsor, we work with these products every day. We understand the complexities and provisions of hybrid products including Hybrid Life/LTC (Lincoln’s MoneyGuard), life insurance with true 7702(b) Long Term Care (Nationwide, John Hancock, AXA), pre-underwritten/paid chronic illness riders (Prudential, American General), and embedded (free) discounted chronic/critical illness riders (American National, North American, Symetra).
We’ve found the money. The market is worth $522 billion. We can help.