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Is Long-Term Care Insurance Still a Viable Option in Today's Market?

This article explores the current state of long-term care insurance (LTCi), examining recent trends such as declining sales, high administrative costs, and industry changes. We discuss the evolving needs of consumers, the financial impact of claims, and alternatives to traditional LTCi products. With over $7.7 billion paid in claims and a significant percentage of claims related to mental disorders, the necessity for effective LTC planning remains high. Key insights include what features are crucial for new LTCi designs and the importance of adapting to market demands.

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Is Long-Term Care Insurance Still a Viable Option in Today's Market?

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  1. Is LTCi Still a Viable Option? ,

  2. What Has Happened • Lack of Sales • Training • Producer Demands • High Administrative Costs • Very service driven • Large reserves • Pricing • Low lapse Rate • Inflation • New types of care emerged

  3. Claims Overview • Over $7.7 billion dollars has been paid through 12/11 • Youngest claimant 27 • Longest claim 18.7 years • $1.7 Million is the largest single claim • 14+ years, annual premium was $881 • 71% of claim dollars have been paid to female claimants • 50% of all claim “dollars” are paid to claimants with mental disorders including Dementia

  4. Recent Changes in Industry • Carriers Exiting the Industry • AIG • Allianz • Berkshire/Guardian • Equitable • Penn Treaty • MetLife • Prudential • Transamerica • Carriers Coming back in • Transamerica • Thrivent

  5. Changes in Industry • No one wanted to be the “Lone Wolf” • Lifetime Benefits • 3.7% sales in 2011 • Shortened Premium Payment Options • Less than 8% of overall sales • Adjusting the Current Pricing • Rate Increases

  6. Today’s Top Carriers • Key Carriers • Bankers Life and Casualty • Genworth Financial • John Hancock • LifeSecure • MassMutual • MedAmerica • Mutual of Omaha • New York Life • Northwestern Mutual • State Farm • Transamerica • United of Omaha

  7. What to Expect • Premiums are not going to go down • Changes in Underwriting • All relates to claims • Do not take risks • Family History • More “lifelike” underwriting • Updated Pricing • Sex Distinct • 5% Compound No Longer Affordable

  8. New Designs • Linked Benefit Products • Single Pay Life Insurance and LTCI • Life Insurance with a LTCI rider • Simple Product Design • Evolution • LifeSecure • Others? • Don’t try to Cover Entire Cost

  9. What fits • What is your Client looking for? • Linked Benefits • Repositioning existing assets and exercising leverage and control • Helps overcome common objections • Traditional LTCI • Using a portion of your client’s portfolio to pay the premiums • Business owners can deduct a portion of the premiums • Best leverage of premium dollar

  10. Tax Incentives • Qualified Premium Limits for 2013 (Attained age before the close of the taxable year) Per Diem Limit for 2013 is $340 per day

  11. The Need is NOT Going Away • 2 out of 3 over 65 will require long term care • Average life expectancy after someone is diagnosed with Alzheimer’s after the age of 70 is 4 to 7 years • Cost of care today verses the future • 50% of people entering a care situation are penniless within one year • It IS going to happen so how are you going to pay for it

  12. Who Does it Really Protect? • Spouse • Children • Grandchildren

  13. Funding the Cost of Your Chronic Disability • Plan A: Keep the Risk (Don’t Plan) • Can happen at any age • Directly and immediately impacts monthly cash flow • Impossible to predict the financial impacts on an individual and their family until the event happens • Monthly distributions are systematic and in most cases, taxable • Plan B: Transfer the Risk (Do Plan) • Provides liquidity on a tax favored basis

  14. Keeping the Risk • Choose an investment class that does not have any market exposure such as CD’s or Treasury’s • Make an adequate lump sum investment that can match what LTCi delivers by Y20 • Promise yourself that you’ll never touch this money for any purpose other than long-term care • How much would this be?

  15. Our challenges • A lack of understanding of what role long-term care insurance plays in the client’s family and finances. • Not having a clear grip on how to overcome sometimes debilitating objections. • Not understanding the competition to LTCI in the form of alternative funding sources such as Medicare, Medicaid, Self Funding and or the VA. • Not being able to confidently recommend the proper coverage to achieve maximum benefit for the client

  16. Typical ltci buyer • Female ages 55 to 64 • Married with Adult Children • Working in a white-collar profession; not yet retired • College educated • Homeowner with 11 or more years in current residence • Affluent: upper middle class with a household income of $100,000 or more • Planner • Exposed to LTC issues • Reasonable and family oriented

  17. Primary reason for purchase • Protect Assets • Security/Peace of Mind • To cover the cost of LTC services possibly needed • Do not want to be a financial burden • I know I’ll need it • Know someone who had trouble paying for LTC

  18. Primary reason for purchase • Getting older • Do not want their children to take care of them • Make sure they are taken care of • Family does not live close • Choose type of care • High cost of LTC Services

  19. Life events that triggered purchase • Planning for Retirement • Client or their spouse retired • Loved one needed LTC • Change in financial situation • Change in marital status • Birth of a child or grandchild

  20. Where the client learned about LTCI • Family or friends • Information from an employer • Financial Advisor • 8.9% • Insurance Agent or Broker • 8.7% • Brochure – Insurance Company • Advertising – television • Advertising – magazine • 55% of people who made the first contact with an agent about LTCI

  21. Reason for buying now • Less expensive to buy now • Know they are getting older • Planning for retirement/future • Seemed like a good idea • Loved one passed away • 70% of people discussed buying long term insurance with family members or friends

  22. Questions to Ask • What is your written strategy? • This should not include their spouse and/or children • How will the costs of extended care impact your family and portfolio?

  23. P.S. • Unwritten Rule #1 • Women lie about their weight • Unwritten Rule #2 • No healthy person will willingly pay $10,000 a year for LTCi • Unwritten Rule #3 • If a client’s daughter approaches you on behalf of a parent/in-law, there is already a problem • Unwritten Rule #4 • All clients believe they are healthy

  24. P.S. • Unwritten Rule #5 • If you are taking an application for a couple, and you discover a health “issue” – STOP and “close the case again”. • Unwritten Rule #6 • Rate increases are inevitable - manage your client’s expectations LTCi is a “sale” not an order

  25. Questions? Susan Carlson 480.718.3153 (Direct) 800.352.3359 (Toll Free) 602.486.4557 (Cell) scarlson@ipg-us.com www.ipg-us.com

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