Combo products giving life back to long-term care market

Even though people value long-term care insurance, new LIMRA research shows stand-alone individual long-term care insurance sales have declined 60% since 2012.

Declining sales are mainly due to cost concerns from the consumer perspective and profitability concerns from the carrier perspective. Fewer carriers are willing to take on the risk associated with the stand-alone products now than when they first appeared in the market.

Yet, while this product declines, the need for long-term care services will increase as more people enter retirement. According to LIMRA data, there will be 82 million Americans in retirement by 2040, and federal government data estimates that 52% of those 65 and older will need long-term care services during their lifetime.

Today, LIMRA estimates that less than 7% of consumers over age 50 have long-term care coverage. What is going to fill this void?

One way is through combination products — life insurance and annuity products that have a long-term care rider.

LIMRA research shows that life insurance combination products have seen growth over the last eight years. Total premium sales in the combination market hit $3.6 billion in 2016 and represented 17% of industrywide premium sales (excluding excess premium). One of the top reasons consumers find these products appealing, LIMRA research shows, is because they receive a benefit even if they don’t need long-term care. Six in 10 consumers say they would consider a combination product to mitigate long-term care costs.

Similarly, sales of annuities with long-term care riders have increased over the past five years. Despite the fact that the number of companies offering the combined products has declined, sales of the Annuity/LTCI combination products have increased 23% on average annually since 2011.

The draw to the annuity/LTC combination products is unlike a stand-alone LTC product; the consumer owns the benefit and purchases it upfront. If needed, the funds for long-term care are there. If not, the value of the product will go to heirs in the event end of life care isn’t needed either.

While we don’t expect to see a rise in individual LTCI sales soon, combination products are a great way to fill the gap the declining individual long-term care insurance sales has left while still meeting at least a portion of consumers’ long-term care needs.

3 COMMENTS

  1. So, with all the hubbub about traditional LTCi sales being down, traditional LTCi sales still beat hybrid products in lifetime premium. Incredible.

  2. Talk about comparing apples to oranges. These findings by LIMRA are a joke. Traditional LTCi has recurring premiums. Most hybrids are purchased with a single premium.

    $228M of traditional LTCi premium paid over 30 years, with a 1% lapse rate, equals more than $6.1 BILLION in lifetime premium. In other words, $228M of new traditional LTCi premium is about 50% more in lifetime premium, than the lifetime premium of all the hybrid products sold that same year.

    Just looking at total lives, traditional LTC insurance had twice as many new lives in 2016 as Life/LTC or Annuity/LTC hybrids did in 2016.

    No matter how you look at it, either in terms of total lifetime premium or in terms of total new lives, traditional LTCi sales were much higher in 2016 than hybrids.

    But most of the insurance industry doesn’t want people to buy traditional LTC insurance. The insurance industry makes a lot more profit on the hybrids which is why the industry is trying to discourage people from buying traditional LTCi.

  3. This isn’t even apples to oranges, its apples to toaster ovens. I’m all for hybrids WHEN they’re the right product. Unfortunately, a lot of middle-class clients are never educated about real LTC insurance, or Partnership protection, or rate stabilization. They spend far more to buy life insurance that they don’t need, to get coverage that won’t work as well as traditional LTCi.

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