Comprehensive research on the state of long-term care insurance intends to advance innovative sales solutions.

The National Association of Insurance Commissioners has published a 181-page report on the LTC market that includes insights from state regulators, consumer advocates, academics and insurance industry executives.

Teresa Miller, Pennsylvania Insurance Commissioner and chair of the Long Term Care Innovation (B) Subgroup, noted that “consumers have struggled to keep up with changes in price and the insurance product itself.”

The study, “The State of Long-Term Care Insurance: The Market, Challenges and Future Innovations,” was developed by the NAIC’s Center for Insurance Policy and Research. The subgroup is examining ways to finance LTC, as well as contemplating the private market’s role in future years.

Miller believes proper education of insurance agents, brokers and advisers is critical to reverse the public’s poor perception of these products. One explanation for low sales is that “consumers feel like they were lied to by their agents when they were told their premiums would never increase,” she reports. Trust also was lost when she says some policyholders continued to face multiple, double-digit rate increases.

Significant market contraction is now the result of anemic interest in LTC. The number of insurers selling these policies has plummeted over the past decade to roughly a dozen carriers from more than 100 across the U.S., Miller points out.

She says a noteworthy development is that traditional policies are now giving way to a hybrid approach involving, for instance, an LTC rider that’s included in a life insurance product. Industry leaders also are recommending that LTC become an opt-out vs. opt-in coverage option or a more integral part of retirement security planning by including the product with life, annuity and other savings strategies.

The larger thinking is to offer something that’s more tangible or a payout to policyholders or heirs relative to other forms of insurance, but there’s still a perception problem to overcome. “We all pay for homeowners or auto insurance, hoping that we never have a claim, but we still find value in the product,” Miller notes. “What we hear from consumers is they don’t necessarily find value in the product unless they think they’re going to use it, and yet, nobody wants to use their long-term care insurance policy.”

Members of the subgroup Miller chairs, which grew out of NAIC’s the Senior Issues Taskforce, have suggested public education campaigns along the lines of the “Own Your Own Future” theme promoted in a number of states years ago. “I think we may want to look at something like that again,” she says. Also envisioned a re informational and educational materials that agents, employers and state officials can get into the hands of consumers as they’re trying to make decisions about retirement and their future.

Room for growth
More than 7 million Americans have LTC, according to the report, which suggested there’s tremendous room for market growth 30 years after policies began to sell. Earned premiums of less than $12 billion (excluding combination products), for example, fall short of about $13.6 billion of in-force premiums for the combined short-term and long-term group disability market and way below $28.2 billion for the group life insurance market.

Agents are seen as critical in helping consumers “overcome the sticker shock of the premiums for an LTC product and demonstrate it is still a valuable purchase,” wrote LTCG chief actuary Vincent Bodnar in an article included in the report entitled, “The Long-Term Care Insurance Puzzle: The Lack of Private Insurance Penetration.” Unaffordable prices were traced to several culprits, including rising claims, low mortality and lower-than-expected policy lapses.

Miller’s subgroup has a wish list for NAIC, as well as the state and federal level, to help move the needle on LTC sales. Given the propensity for ideas that aren’t realistic in this political climate, she notes that the focus is on incremental change aimed at dispelling fears and the negative publicity associated with LTC.

“If we break down some barriers to allow for more innovation, but also maintain consumer protections, then that’s part of the conversation we want to have,” she says.

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