The severe economic downturn last year crumpled widely held hopes among long term care insurance producers and carriers for a reversal of 6 straight years of falling sales. New premiums and covered lives saw a continued downturn in 2009, year-to-date data shows.
In the first nine months of 2009, individual LTC insurance sales tumbled 29%, while group and worksite sales were down by 28%, according to a study by LIMRA International, Windsor, Conn. In 2008, individual premiums had fallen just 1% by the end of September, while group sales were actually up 7%. In fact, by year-end 2008, group sales premiums were up 18%.
There may be signs of hope for the industry, however. Data for third quarter 2009 does appear to show that the decline in LTC premium may be abating, reports Jennifer Douglas, an associate research director at LIMRA. In the first half of 2009, premium had been down 31%, but that fell to 29% year-to-date by the end of the third quarter, she points out.
"It is important to note, however, that sales first took a significant turn for the worse in third quarter 2008," Douglas says. "In fact, [individual LTC insurance] sales premium has been down every quarter since second quarter 2008," she notes.
Total new premium for group LTC was $66 million in the first half of 2009, down 21% from a year earlier. Douglas attributes part of the decline to falling numbers of new participants in existing groups and in a drop of association business, both of which fell by more than 25%.
"The industry found a bright spot in premium from sales to new employer groups, which posted 10% growth and accounted for just under half of all new premium" in the first half, Douglas says.
New York Life Insurance Company, which by and large does not sell in worksites, has fared much better than the industry as a whole this year. Its sales were down only slightly compared to 2008, says Mike Gallo, senior vice president in charge of long term care for New York Life.
"Almost every company is struggling" in the industry, says Gallo. "When people are in an economy like this, long term care is on the bottom of their list in spending."
Gallo believes his company has fared better than most in the industry because it has never raised LTC premiums for in-force policies and because it has maintained strong financial ratings in a year when several companies have been downgraded.
One sign of hope is the continued advance of LTC Partnership programs in the states, industry experts note. Now 27 states have LTC Partnership programs, which coordinate private LTC insurance coverage with Medicaid nursing home benefits.
About half of consumers who purchased LTC policies from MetLife this year bought Partnership policies, reports Jodi Anatole, vice president of MetLife Long Term Care.
MetLife has also developed simplified, lower-cost LTC products. "That has allowed us to gain traction with new producers. They are looking for simpler products."
Although its sales of LTC insurance were hit hard this year, MetLife has seen growth in the small group market, Anatole says. "There are a lot more smaller employers, some with as few as 10 lives, offering long term care than in the past."
Another LIMRA survey found the sales force in the industry, once dominated by career agents who sold only LTC insurance, has shrunk, reflecting the departure of many career producers from the business. Career producers accounted for 41% of new premium in 2008, down from 44% in 2004. Independent agents had 54% of LTC sales in 2008, up from 47% 5 years earlier.
Jesse Slome, executive director of the American Association for Long Term Care Insurance, Westlake Village, Calif., thinks the recession might actually be attracting more producers to the industry.
"With more people out of work, selling long term care insurance has become a highly attractive option for many, and there is significant recruitment and training of new agents into the industry," he says. "Conversely, clearly with less discretionary dollars to spend, there are fewer consumers looking into coverage, partly because the industry is saddled with an image of products being expensive."
