Lessons for producers from the 2011 Long-Term Care Insurance Sourcebook
By Jesse Slome
American Association for Long-Term Care Insurance
This article discusses the recently released 2011 Long-Term Care Insurance Sourcebook, and some tips and tactics that will benefit producers attempting to market long term care solutions in an industry that can longer be described as one-size-fits-all.
Every year I spend over two months collecting, tabulating, preparing and proofing data for the Long-Term Care Insurance Sourcebook. When it's printed and in the mail I breathe a sigh of relief and actually start thinking about the next one.
What's missing from the process is reflecting on what one can learn from the data, what surprised me, and what tips and tactics will benefit producers attempting to market long term care solutions. I use the term solutions specifically because increasingly, this is no longer a one-size-fits-all industry.
Before you settle down with a cup of tea expecting to glean the complete findings of our research from this article, be forewarned. I will reveal select highlights of statistical data. For the full details, you really need the full 48-page sourcebook, which we send to all association members.
But back to the data. Not much has changed from 2009 to 2010 in terms of buyers of individual LTC insurance policies. Four out of five buyers are purchasing long term care insurance prior to reaching age 65 and for those still looking at old data, that is a significant change that has been happening over time. Long term care planning once was relegated to those who focused on seniors. Agents focusing on the post-retirement market are finding the prime prospects have already been contacted and increasingly sold.
Our study using data from insurers marketing policies for individuals suggested, to our surprise, the continued growth of benefits being paid for home care. Just under half of all new claims starting in 2010 began as home care claims. That's an increase, and more women than men begin their claim at home. I have long touted long term care insurance as “nursing home avoidance” coverage and clearly; that's what consumers want and how this protection meets their needs.
For the first time, we really took a look at the newer hybrid products. These are the life insurance and annuity policies that provide accelerated long term care benefits. Both categories have grown significantly over the past few years, and I predict this is only the beginning. In fact, life plus long term care premium for the participating insurers surged 79 percent in 2010. For annuity plus LTC policies, the sales surged 135 percent. Expect sales to really surge as some large mutual fund companies that also offer annuity products enter the market. Admittedly, the sales pitch for these products is sweet: Finally, a form of long term care protection that pays even if you never need long term care. Overcoming a formidable objection held by many consumers, it's no wonder these products are gathering steam. That said, for these single-premium products to provide a meaningful LTC benefit, the purchaser must be willing to transfer a rather significant amount of cash. Therefore, we wanted to know what was really happening in the marketplace.
If most sales were in the $25,000 to $50,000 category, it would tell us that consumers liked the sales pitch but were buying coverage that really would not provide them with meaningful long term care protection at some future date. That could put the industry at some risk. Fortunately, our findings revealed the vast majority of single life premiums were over $100,000, and about a fourth were over $200,000. Single premium amounts for annuity policies were lower; something we'll look to compare next year.
While hybrid products will continue to gain popularity, they serve a very specific niche market — those with what I refer to as “lazy money” that they can transfer from one bucket to another. They will not replace traditional long-term care insurance on a policy count basis.
Finally, while the findings are consistent with prior studies, I find that the single most relevant fact contained in our sourcebook is the report of what actual consumers pay for long term care insurance broken down by age band.
What makes this so vital is the fact that often media stories report industry averages that state the average long term care insurance policy costs $2,200. To the typical married couple, that translates to $4,400 for coverage (probably more) and the "too costly" objection is permanently cemented in their mind.
For the sourcebook, we report what real consumers pay, broken down into various age bands. For those under age 61, one-quarter (25.1 percent) paid under $1,000 a year. Another 18.3 percent paid between $1,000 and $1,499. This type of information is so vital in an era where expanding the marketplace depends on reaching beyond the traditional higher-income affluent consumer.
To see a complete page-by-page breakdown of what's inside the 2011 Long-Term Care Insurance Sourcebook, go to http://www.aaltci.org/sb