1. What is the current state of the LTC insurance market?
After a rapid expansion through the 1990s, the long-term care industry has continued to face many financial strains over the past several years due to the payout of costly claims. This has led to continued increases in policy holder premiums, along with dramatic consolidation in recent years and fewer insurance carriers actually writing new stand-alone LTC policies. Those carriers that are still issuing new policies have had to do so with higher premiums, along with fewer and / or reduced benefits. For example, in the past, many carriers offered an Unlimited, or Lifetime benefit option. Today, that is no longer the case.
2. Is it cost-effective for consumers?
Traditional LTC insurance has become cost prohibitive for many consumers. In some cases, those who have purchased long-term care insurance policies in the past have seen their premiums double, or even triple, over the years.
However, there are other options that are available for consumers that can help them in covering long-term care needs while at the same time, also allowing them flexibility. For example, combination life insurance / LTC products provide a death benefit along with the ability to access funds in the case of a long-term care need. Likewise, combination annuity / LTC products provide the ability to access a monthly benefit if they need long-term care.
These products can be much more cost-effective because the consumer (or their heirs) will receive a benefit either way – regardless of whether they end up requiring long-term care services or not.
3. Have there been any recent changes?
Some of the recent changes in the LTC insurance market have included:
• Financial strains, leading to carrier consolidation
• Fewer insurers writing new stand-alone LTC policies
• Many insurers working with state insurance commissions to raise premium rates on current / in-force policies
4. What’s driving the changes?
Some of the primary factors that are driving these changes include the fact that many of the carriers offering LTC insurance simply could not offer the promised level of benefits based upon the amount of premiums that were being charged. In other words, their policies were severely underpriced, based upon the amount of benefits that were ultimately being paid out. Longer life expectancies of today’s consumer is one of the driving forces in this case.