A new partnership seeks to breathe new life into the long-term care insurance space, whose sales and acceptance producers have long found to be sluggish.
The National Guardian Life Insurance Co. (NGL) recently became the nation’s first insurer to enter the market for stand-alone LTC insurance in more than a decade. Teaming up with NGL is the LifeCare Assurance Company, which designed and will administer the product.
“A new entrant in the long-term care insurance market is clearly a positive development, not just for benefit brokers and advisers, but for consumers as well,” notes Teresa Miller, Pennsylvania Insurance Commissioner and chair of the Long Term Care Innovation (B) Subgroup. “This is a market that has frankly struggled over the last several years as more and more companies have decided to stop selling the product.”
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EssentialLTC will cover facility-based services such as nursing home care, comprehensive home and community-based care. Key features include limited pay, lifetime benefits, return of premium, joint policy discounts and a so-called 1035 exchange to maximize the product’s preferential tax treatment.
Although an agent-driven product aimed at the individual sales marketplace, it could work well as an executive carve-out, explains Jim Glickman, president and CEO of LifeCare Assurance, which specializes in developing, launching and administering LTC insurance programs.
Somewhere between 20% and 25% of the total number of policies issued fall into the endorsed group situation “because the particular decision makers who wanted the product for themselves bring it into their companies for the key executives,” he reports.
Glickman doesn’t expect it will be used much as a voluntary purchase product geared toward middle-income employees “because most of the companies in that market want some type of simplified or guaranteed issue. There is very full, heavy underwriting on this product, and therefore, it’s less expensive and benefit rich than most other products.”
But there could be changes made at the federal level down the line to help broaden the appeal of LTC insurance. “As regulators,” Miller adds, “we will continue to work through the challenges in the market with our carriers, but we are also focused on finding ways to have the private market play a more meaningful role in financing the long-term care needs of our society.”
Off the radar
Since the LTC market relies on strong interest rates and is affected by downturns in the economy, he says the product has not been on the radar of very many companies in recent years. “But I would say in the last year or two, we as a reinsurer have noticed that there’s a lot more interest in exploring the marketplace,” he adds.
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NGL could be “the first of several carriers that will enter the marketplace in the next three to five years, even if the interest rates remain low,” according to Glickman. “I would predict there’ll be even a significantly higher number of new entrants if interest rates start to move up significantly in the next couple of years.”
At the time of the product’s release, he noted that as a mutual company with more than a century in the insurance industry, “NGL brings a long history of financial stability to the stand-alone long-term care insurance program.”
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