What lies ahead for the somewhat embattled world of long-term care insurance sales? New regulations, including the Community Living Assistance Services and Support Act, and some new product innovation promise to turn the tide in 2011.
It continues to be a tough market for LTCI sales. According to LIMRA, sales for the first half of 2010 recovered from 2009′s low levels, but the numbers still weren't great for individual policies: "Compared to the same period in 2009, which saw declines of over 30 percent, there were 11 percent more buyers and premium grew 13 percent in the first half of 2010."
Those stats sound more encouraging than they really are, however, because the basis of comparison is a horrendous first half of 2009. LIMRA notes: "When current sales are compared to the first half of 2008, new lives and premium were down 23 and 22 percent, respectively."
That's the bad news. The good news is that regulatory and product developments could help LTCI sales get back on track. We asked several industry leaders for their views on the essential developments and trends advisors should monitor.
The CLASS effect
"The biggest development is the planned introduction of the CLASS Act," says Jesse Slome, executive director of the American Association for Long-Term Care Insurance. "This is the government long-term care program that was included as part of health care reform, which was passed."
But many of the CLASS Act's details are still undetermined. "A lot of regs have to be developed over the next year or two," says Malcolm Cheung, vice president of long-term care product and risk management for the Prudential Insurance Company of America. "The product design needs to be nailed down. The premiums need to be nailed down."
These key unknowns include:
- The exact level of disability needed to obtain benefits will be determined by the secretary of Health and Human Services.
- The initial average benefit will be no less than $50 a day but will vary by level of disability.
- The legislation requires between two and six benefit levels but does not specify how many
levels or each level's benefit.
The passage of the CLASS Act could provide another reason for prospects to delay buying LTCI. But the uncertainty and benefit limitations with the act present a potential business opportunity, as well, says Slome: "We're recommending that producers take the initiative to make themselves local CLASS experts. They can start to position both the positives and the negatives of the CLASS Act, whom it's for, whom it isn't for, etc."
Cheung offers similar advice. "The average cost of a nursing home in the U.S. today is over $200 per day," he says. "So you would certainly need to supplement whatever CLASS benefits are provided,
and there are some features of CLASS that some consumers may not particularly care about.
"My advice to producers is to certainly not stop talking to your clients or prospects about long-term care insurance just because of the potential for this CLASS program to go into effect."
