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"Consumer awareness" joins "the aging population" and "the Federal Program" at the top of the list of reasons for insurance industry optimism regarding the future of long term care insurance. It is also what is keeping LTC insurance executives up at night.
Insurers and producers agree that the industry has made progress over the past several years. Americans are becoming more aware of LTC needs and of LTC insurance.
However, this growing awareness has yet to translate into sales. Only 5% of individuals over age 50 have purchased a policy, according to LIMRA International estimates. This is a far cry from the 35% penetration rate industry executives estimate will be needed to significantly impact LTC financing needs in the United States.
Producers and executives interviewed at various focus groups sponsored by LIMRA expect the desired penetration rate will be achieved sometime in the next 10 to 20 years. Their hope is that, as LTC insurance goes mainstream, more and more people will start talking about it, as happened with 401(k) plans.
The question many LTC insurance marketers are trying to answer is how to accelerate this growth. One answer may be to make the product more attractive to consumers. To date, both insurers and producers agree product enhancements have made the coverage more marketable.
Many intermediaries commend carriers on having done a good job of identifying and delivering product features consumers want, such as spousal discounts, home health care and assisted living benefits. The question is, at what cost? Some industry executives feel, as do many consumers, that the product has become too complicated and should be simplified.
Most producers and insurers believe the product is strong and that the answer lies not in the product but in expanding current marketing strategies and in strengthening the industrys image. In fact, when asked about future prospects, most producers in a recent qualitative research study indicated they expected their LTC insurance business to grow.
As demand for the product rises, these producers also expect more producers will enter the market. Further, they foresee alternative distribution channels challenging the more traditional channels currently being used today.
It is commonly believed that growth will come when the industry does a better job of educating the public about what the product is and what it is designed to do. The more exposure individuals have to this product, the greater the chance the core message will be heard.
