Hopes for growth for long term care insurance have taken a sober turn, as many professionals in the industry are beginning to face up to obvious weaknesses after several years of declining sales.
A recent LIMRA International survey of 83 LTC insurance professionals from 45 companies found that far fewer see the LTC insurance industry headed for moderate to strong growth than did so when LIMRA conducted a similar study three years earlier.
Asked to look three years into the future, 54% of survey participants predicted flat sales for the industry, compared to 21% who had made that same prediction in 2006. And 18% in the latest survey predicted LTC insurance sales will decline over the next three years.
In spite of favorable tax opportunities resulting from the Pension Protection Act of 2006, which extended tax exemptions to products that combine life insurance or annuities with LTC insurance, LIMRA found professionals in the industry were actually less enthusiastic than they were in 2006 about combination products as a future leader for the industry, comments Jennifer Douglas, an associate research director at LIMRA, Windsor, Conn.
Respondents did say they expect annuity-LTC combinations to be more successful that life-LTC, she reports. "It should also be noted, however, that respondents were LTCI professionals and that those in the annuity or life industries may be more encouraging," Douglas says.
Many professionals blame carrier lapses, such as a perceived lack of product innovation, financial instability and rate increases, for fueling consumer resistance to LTC insurance. Partly as a result of the rate increases in recent years, the issue of affordability of LTC products also will continue to weigh on consumers' minds at least in the near term, Douglas says.
On the plus side, the industry could benefit from the continued aging of the U.S. population, enhanced consumer awareness from state Partnership programs and other government efforts to draw attention to the need to protect against extended care, she says.
Douglas also points to opportunities in the worksite, where multi-life sales, representing just under 10% of all new individual LTC insurance business, grew 49% in 2008. She also notes that LIMRA's study found that 21% of LTC insurance professionals predict strong growth for individual multi-life sales.
Jesse Slome, executive director of the American Association for Long-Term Care Insurance, Westlake Village, Calif., expects that annuity-plus-LTC combination products could be significant for the LTC insurance industry in 2010.
Only a few companies, such as John Hancock, Mutual of Omaha and Genworth, market combo products currently, but Slome predicts others will start to introduce annuities that offer an LTC benefit. He expects, too, that annuity companies that do not offer traditional LTC insurance will start to bring out combo products, looking to capitalize on 1035 exchanges.
"As this segment starts to show growth, I expect major annuity players will enter the marketplace if only to prevent an outflow of assets under management," says Slome.
