This blog is now located at: https://www.ltcipartners.com/blog
October 28, 2015
September 25, 2014
Gender based pricing - how's it impacting LTC planning?
It's now been a couple of years since LTC carriers have introduced sex-distinct rates in LTC Insurance. What's been the impact?
First a reminder of why gender based pricing was introduced. According to Genworth 2013 claim information, about 66% of claims are filed by females. Another way of looking at it was that in 2011, according to the AALTCI, only 1/3 of the $6.6 billion in claims was paid out to men. These claims trends have been evident for many years, and as carrier received more and more single female business they became justifiable concerned.
The answer was gender specific rates. Just as life insurance uses gender for pricing since men don't live as long (thus have higher premiums), carrier actuaries priced woman applicants for LTC insurance higher, while lowering rates from men.
Of course, once one carrier started the trend others had to follow lest they attract a heavy proportion of single female business. The impact - fewer single female applications and more couples applications. On the other hand, the reduction in premium for single men has probably not attracted new business because they have always been a small percentage of LTC purchasers.
Now, most of the major carriers offer sex distinct pricing with one notable exception - employer based programs.
Employer programs are subject to Title VII of the Civil Rights Act, which bans discrimination by sex for employer benefit programs. Because of this LTC premiums for men and woman employees are the same. For single females considering LTC Insurance, they may want to check if their employer offers a program first.
September 12, 2014
September 05, 2014
The conversation is no different than what you’re having now...
Most advisors are comfortable talking to clients about risk (usually market-related), but not as comfortable talking about insurance, let alone long-term care (LTC) insurance. Don’t let LTC jargon or policy nuances stop you from having this important conversation. Speak to your clients in your language – talk to them about managing risk.
Long-Term Care is a Risk Management Issue
LTC Risk Management Process
Identify - Longevity/extended healthcare can be a risk to your clients' retirement planning
Reduce - We can’t reduce the risk of needing long-term care (good health = risk of needing help at an advanced age)
Control - We can try and try, but we can’t control father time
Assess - Funding and caregiving options
Analyze - Insurance and family (self-insurance) solutions
Transfer - Mitigate the risk by implementing a formal strategy (bona-fide plan to fund and manage a long-term care event)
September 03, 2014
August 28, 2014
August 19, 2014
Download a new guide with tips on choosing between Standalone and Linked LTC products
Wondering what the best LTC solution is for someone planning for LTC? As shown in this mind-map, there are four basic categories of ways to plan for LTC in the future:
- Savings and investments (self-insurance)
- Standalone LTC Insurance
- LTC Insurance combined with Life Insurance
- Monetizing other assets, such as reverse mortgages
LTCI Partners has created a new special report with tips on choosing between standalone and linked life/ltc products- you can download it by clicking the image below. Comments would be appreciated !
August 12, 2014
NAIC regulators looking at new ways to help manage LTC rate increases
Every once in a while the National Association of Insurance Commissioners gets together to modify the Long-term care model regulation related to rate stability of LTC premiums. On August 19th, the NAIC will meet in Louisville to discuss the issue again.
The reasons for in-force LTC increases are well known - poor morbidity (underwriting), higher policyholder persistency than expected, and the very low interest rate environment. Although policyholders are not happy about the premium increases they receive, when they compare those increases to the cost of current policies they often realize they made a great choice.
Currently rate stability regulations affect initial actuarial certification of a product filing - with the insurance carrier saying this product is responsibily priced and premiums should be stable. If premium increases are necessary in the future, than policies would be subject to a higher minimum loss ratio requirement.
The new proposed regulations would build upon these regulations. Here are some key proposed changes:
- Requiring products to have annual actuarial certification regarding pricing instead of when the product is initially offered.
- A new minimum margin be incorporated into pricing to encourage more conservative (i.e. higher first year) pricing.
- New consumer disclosure requirements to discuss how plan changes to mitigate rate increases may affect Partnership programs.
- Expansion of contingent benefit (where consumers get the premiums they paid to use as benefits) upon lapse by requiring that consumers who have held policies for more than 20 years will get this benefit automatically.
If the NAIC adopts the model regulation changes, then states will have to implement the changes as well.
LTC Insurance, which is guaranteed renewable using issue age pricing, is very different than health insurance which has pricing increases built in based on age changes. An insurer's LTC book of business will have very low loss ratios in early years because people typically don't submit a claim until they are much older. For regulators, it gives the appearence that the block of policies is very profitable for the carrier for many years even though there will be heavy claim costs at the tail end of the policyholders life.
The downside to increased regulation, of course, may be higher initial premiums. Is is worth the trade-off to have more consumer protections? What do you think?
July 22, 2014
How much standalone LTC insurance benefit can a couple get for $5,000 per year in premium?
In a previous blog post, we discussed how much in annual premium it would cost for an initial benefit pool of $1,000,000 using the latest premium rates from four (unnamed) LTC carriers.
Solving for the premium is often an approach that is used in buying insurance products such as term life or long-term care. However, what if we want to instead solve for the benefit using a combined couple's premium of $5,000?
In this example, we look at the initial benefit pool for plans with both an automatic 3% compound (or CPI) inflation rider and the same carriers with no automatic inflation coverage.
For a 50-year-old couple choosing 3% compound (or CPI coverage), the results are fairly similar - about $500,000 in coverage with similar daily benefit and benefit periods. Another way of looking at that is $1,000 in premium will give someone about $100,000 in benefits.
On the other hand, choosing no inflation resulted in dramatically different benefit amounts. Carrier 2 plan benefits for no inflation were $390 per day for a five-year benefit period for both spouses. It may be the smart choice is actually buying a lot of coverage up front instead of waiting for the automatic inflation coverage to catch up.
Take a look at the graph below and comment:
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