Dawn Helwig, FSA, MAAA

In 2010, Milliman began collecting demographic information about buyers in the multi-life (ML) market as well as policy configuration. This market consists of sales made with discounts and/or underwriting concessions to groups of people based on common employment or affinity relationships.

Multi-life sales are generally made to employers with fewer than 500 employees (worksite sales) or to groups of people who share something in common (such as membership in an association) other than a common employer (affinity sales). They do not offer guaranteed issue. Multi-life sales can use either group policies with certificates or individual policies (individual policies and group certificates are collectively referred to as “policies” herein).

The July 2011 issue of Broker World magazine reported on the overall individual long term care insurance (LTCI) market. Its policy exhibit displayed products available in the ML market, some of which are sold only in the ML market.

This article compares the ML sales to the total sales (other than single premium) reported in the July 2011 survey. There is also a comparison of multi-life policy distribution to both individual LTCI policies that are not multi-life (NML) and the total individual market. The survey excludes large group cases (those likely to offer guaranteed issue) and combo (linked) products that pay life insurance, annuity or disability income benefits in addition to LTCI.

The multi-life market has been a growing portion of LTCI sales. Many LTCI professionals look to the ML market—particularly the worksite market—as an opportunity to resume industry growth. There is a significant opportunity, but it is important to remember that new markets can grow at fast percentages because prior-year sales are low. It may be difficult for the worksite market to sustain the growth rate some people expect, because of (1) the economy; (2) young workers who have higher priorities for their take-home pay than buying LTCI; and (3) today’s higher LTCI prices, which dampen penetration rates.

The government intends to spend $93 million to promote the Community Living Assistance Services and Support (CLASS) Act, a government-run LTCI program intended to be unfurled in 2013 and implemented through the worksite. Almost everyone agrees that CLASS will increase private LTCI sales in the short run; however, long-range prognostications vary from a permanent boost of private LTCI sales to total elimination of the industry.

Some people believe the private LTCI industry will gravitate to selling policies which supplement CLASS, but there are many significant hurdles which would have to be overcome. Because CLASS would be available to employees only, it would have a greater initial impact on the ML market than the NML market.

About the Survey
Twelve insurers contributed data to this analysis of the multi-life market. Three of the other six insurers that congributed data to the 2011 Individual LTCI Survey do not serve this market, and the other three have very low ML sales.

In the individual LTCI survey published in 2010, 14 of 20 participants reported ML sales. The number of ML carriers decreased from 14 to 12 because one ML carrier discontinued its LTCI business and because another carrier that reported 4 ML policies sold in 2009 reported no such policies in 2010. Depending on your definition of multi-life, our data may under-report sales. For example, if an insurer has a five-life requirement to grant a discount or underwriting concession and two business partners and their spouses buy coverage, the case will typically not be recognized as a ML case. Fraternal business (i.e., business sold by an organization created to serve people with a common religion, occupation or ethnicity) is not included as multi-life. Ironically, if that same group were served by a typical insurance company which granted members a discount, it would be recorded as ML business.

Key Findings
• In 2010, the 12 carriers sold 60,239 multi-life policies (a 20.5 percent increase over 2009) for $117,438,518 of new annualized premium (18.7 percent increase). The same carriers sold 50,005 ML policies for $98,945,942 of new annualized premium in 2009. These premium figures include exercise of future purchase options and upgrades on existing policies.

• These 12 carriers’ multi-life LTCI sales accounted for 27.5 percent of new policies issued in 2010 by all 18 companies that contributed to the overall survey, up from 26.3 percent for the same 18 participants in 2009. However, the percentage of new annualized premium that was ML was almost unchanged, 24.2 percent in 2010 versus 24.3 percent in 2009.

• Ignoring insurers that did not report multi-life sales, the 12 companies reported that 31 percent of their total sales were ML. Three insurers reported more than half of their policies being sold with ML discounts (72.4 percent, 60.1 percent and 53.2 percent respectively). Eight carriers ranged from 19.6 to 44.1 percent, with only one carrier reporting less than 19.6 percent of sales in the ML market.

• The average premium for multi-life business dropped from $1,979 in 2009 to $1,950 in 2010. The 2010 ML average size premium was 83 percent of the average size premium for NML sales ($2,341).

• Total reported in-force multi-life business consisted of 382,342 policies and $727,281,848 of annualized premium—11.5 percent of total in-force policies and 12.0 percent of total in-force premium. So the percentage of ML sales the past two years has been twice the current in-force percentage of ML, an indication of a growing market.

• Most of the multi-life sales were reported to be affinity policies (73.7 percent) and affinity premium (77.8 percent), as opposed to worksite. However, some insurers report worksite cases as affinity cases if they don’t involve underwriting concessions.

Statistical Analysis
Insurers’ multi-life markets can differ tremendously.
• One insurer might focus on executive carve-out sales and have issue ages weighted to those 40-65 years of age with a high percentage of large maximum monthly benefits, lifetime benefit period, short elimination periods, robust benefit increase options, a lot of limited pay sales, many couples both buying, and preferred health discounts.

• Another might focus on voluntary programs in the worksite, perhaps with employers buying small coverage for every employee. Such a company might have a low issue age, low percentage of large maximum monthly benefits, few lifetime benefit periods, almost entirely 90-day elimination periods, weak benefit increase options, many single people, and few preferred health discounts.

• A third might be dominated by an association of older-age individuals. Such a company would have a high issue age distribution, few lifetime benefit periods, many single people, and few preferred health discounts.

Issue Age. Table 1 shows that multi-life sales are more weighted toward ages below age 55 than are other sales. The reverse is true for ages 55 and over. The overall average age of purchase in 2010 was 57.9, but it was 55.7 in the ML market and 58.8 in the NML market.

The ML market includes segments with various characteristics: The worksite market has a young age distribution (35.5 percent of ML sales are below age 55 and that percentage would be higher for worksite business). The AARP market is entirely above age 50. The balance is other affinity business which may have a distribution similar to NML business (11.7 percent below age 50).

Rating Classification. The multi-life market had a lower percentage of cases issued in the most favorable rating classification (41.4 percent) than did the NML market (49.5 percent). But that is primarily because the ML market includes simplified underwriting cases for which the most favorable classification is not available (see Table 2).

The simplified underwriting business also causes the ML percentage of second-best classification to be higher than for the NML market.

Looking at only the ML cases that involve full underwriting, the percentage assigned the most favorable rating increases to 48.4 percent.

Benefit Period. Table 3 demonstrates that shorter benefit periods are more common in the multi-life market. Five-year benefit periods are about as common in each market, while longer benefit periods are more common in the NML market.

For the five-year and 10-plus (but less than lifetime) benefit periods, the total market percentage is not within the bounds of the ML and NML markets. That is because the total column includes sales from carriers that do not sell multi-life.

Only 8 percent of ML sales have a lifetime benefit period, whereas 15.2 percent of NML sales have a lifetime benefit period. That is partly because programs with simplified underwriting (fewer health questions) do not permit lifetime benefit period (although lifetime benefit period is available with additional underwriting sometimes) and because some small carve-out programs are not being picked up as ML.

Among limited benefit period ML policies sold to couples, 43.5 percent include shared care, whereas only 40 percent of such policies in the NML market include shared care. The companies that don’t participate in the ML market also happen to be companies that sell less shared care in the NML market. The ML market is very different from the true group market in this respect because few true group programs offer shared care.

Maximum Daily Benefit. More than half of the multi-life sales (50.3 percent) have an initial maximum benefit lower than $150/day, whereas only 42.4 percent of NML policies start with a maximum benefit lower than $150/day (see Table 4).

Benefit Increase Features and Partnership Qualification Rates. Table 5 shows a lower percentage of multi-life policies are sold without a benefit increase feature than is the case for NML policies. Multi-life policies were twice as likely as NML policies to have a CPI increase feature.

This is another striking difference compared to the group market, which sells a lot of future purchase options.

The benefit increase requirement to qualify under the state partnership programs varies by age. Generally a level premium, permanent annual 3 percent or higher compound increase or an otherwise similar CPI increase is required for issue ages 60 or less. For issue ages 61 to 75, 5 percent simple increases also qualify and for issue ages 76 or older, policies qualify without regard to the benefit increase feature.

Table 6 identifies the percentage of policies that would have qualified for the partnership program if it had existed with those rules in all states. However, if partnerships were available in all states (with the rules cited in the previous paragraph), the percentage of partnership policies would exceed the percentages shown in Table 6, because the distribution of sales would change in those states that don’t currently have partnership programs.

The multi-life market is weighted more toward partnerships despite having a lower percentage of sales in the age 76-plus age range and despite having some core programs (where the employer pays for a small amount of coverage for all employees) that are not partnership-eligible.

Elimination Period. Multi-Life sales are more clustered to 90-day elimination periods. There is less customization of this feature in the ML market than in the NML market (see Table 7).

Sales to Couples and Gender Distribu­tion. The multi-life market had a lower percentage of female buyers in 2010 than the NML market, which might be explained by a different age distribution (many buyers above age 65 are single women). The overall market had a higher percentage of female sales than either the ML market or the NML market for the 12 insurers that contributed ML data. That’s because the carriers that did not contribute ML data had a high percentage of female purchasers, at least partly due to an older age distribution (see Table 8).

The multi-life market also has fewer sales to couples who both buy and to single people, but has more sales to one-of-a-couple.

Type of Home Care Coverage. Table 9 shows that multi-life had a similar distribution to NML sales for home care coverage except that nearly four times as high a percentage of ML policies (4.1 percent) as NML policies (1.1 percent) had a cash/disability design. A company that sells a lot of disability benefits had a larger share of the ML market than it did of the NML market.

Limited Pay. Ten-year pay and paid-up at age 65 are more prevalent in multi-life sales situations than in the NML market, yet account for only 3 percent of the ML market. As noted earlier, some executive carve-out cases have not been coded as “ML.”

Closing
We thank insurance company staff for submitting the data and responding to questions promptly. We also thank Nicole Gaspar of Milliman for managing the data expertly.

Data has been reviewed for reasonableness; nonetheless, we cannot assure that all data is accurate. If you have suggestions for improving this survey, please contact one of the authors.

July 2011

2011 Individual
Long Term Care
Insurance Survey

CLAUDE THAU

DAWN HELWIG

ALLEN SCHMITZ

The 2011 Individual Long Term Care Insurance Survey is the thirteenth consecutive annual review of individual long term care insurance (LTCI) published by BROKER WORLD magazine. LTCI covers costs incrued from care homes, adult daycare, assisted living, other elder care Lynchburg services and other costs associated with long-term care of an adult person. The survey compares products, reports sales distributions, and analyzes the changing marketplace.
Unless otherwise indicated, references are solely to the U.S. stand-alone LTC insurance market, which includes individual policies and some group certificates sold to multi-life cases. “Stand-alone” refers to LTC insurance policies which do not include annuity, disability or death benefits (other than provisions such as “return of premium” or survivorship features). The large group market (which offers guaranteed issue) is not included in this report.

Highlights from This Year’s Survey

• LTCI sales increased in 2010. The 18 carriers that contributed statistical data to this survey sold 218,978 policies for $485,680,255 of new annualized premium in 2010 (plus $3.5 million from 72 single premium policies). This compares to 196,370 policies (11.5 percent more policies in this year’s survey) for $428,506,015 of new annualized premium (13.3 percent more premium) for the 20 such carriers in 2009.

The 18 participants that contributed both years sold 17.8 percent more policies and 19.5 percent more annualized premium in 2010 than in 2009. Thus, it is estimated that the entire stand-alone LTCI industry sold 238,000 policies for $530 million of annualized premium, approximately 6 and 10 percent increases respectively over 2009.

These figures do not include future purchase options or upgrades to existing policies. (Seven carriers reported a total of $4,493,236 of annual premium added from 15,746 FPOs.)

• Sixteen participants reported individual claims (including multi-life) and four reported true group claims. Their total paid claims exceeded $2.5 billion in 2010, approximately 94 percent of which were individual claims. The survey’s number of 2010 claims was distributed as follows: home care and adult daycare-39.7 percent, assisted living facilities-22.8 percent, and nursing homes-37.5 percent.

There are many facility only policies represented in the claims statistics because most claims come from policies sold long ago. The termination of facility only policies and increasing use of home care should both cause the percentage of home care claims to increase in the future.

• The LTCI industry has made a much bigger difference than the above numbers indicate because a lot of claims are paid by insurers who no longer sell LTCI. According to the NAIC, the industry incurred more than $5 billion in claims in 2008, boosting the industry to more than $55 billion of claims incurred.

• One carrier is new to the LTCI industry-Humana, which is piloting a policy in six states-but not participating in this survey. Since our 2010 survey, four carriers have announced discontinuation of LTCI sales: MetLife, Berkshire (by December 29, 2011 at the latest), Assurity, and AFLAC (which continues to issue new coverage for existing cases).

In 2004, 36 carriers displayed products in our survey. Last year, 19 carriers did so; and this year, 16 carriers are displaying products. In total, we estimate that 25 carriers sell either individual or group stand-alone LTCI. Industry consolidation boosts the average sales per carrier.

• For the first time, sales characteristics differences between multi-life and non-multi-life sales will be reported. That data will appear in the August issue of Broker World.

About the Survey
This article is arranged in the following sections:

• Market Perspective (on page 4) provides insights into the individual LTCI market.

• Statistical Analysis (on page 4) presents industry level sales characteristics. In addition to the displayed participants, MetLife and Northwestern Mutual contributed data.

• Premium Rate Details (on page 27) explains the basis for the product-specific premium rate exhibit.

• Product Details (on page 9) provides a row-by-row definition of the product exhibit. There are 28 products displayed, including seven new products. Three of the new products are sold exclusively in the worksite (Genworth, Mutual of Omaha and United of Omaha); and four are available on-the-street (Genworth, John Hancock, Transamerica and United Security). Some other companies have made significant product modifications.

Claims. Sixteen participants reported individual claims and four companies reported group claims. Combined, paid claims exceeded $2.5 billion in 2010 and were distributed as follows: home care and adult daycare-39.7 percent, assisted living facilities-22.8 percent, and nursing homes-37.5 percent. These distributions will shift more toward home care as the industry in-force block shifts toward comprehensive policies and the use of home care increases.

The average annual amount paid per nursing home claim in 2010 was nearly the same on individual and group policies-$18,189 versus $18,457. The average claim is small compared to the annual cost of nursing homes because:

• Many claims started during 2010 or ended in 2010, thereby not contributing a full year of cost. Some started and also ended in 2010.

• The older policies probably have low maximum benefits because they were sold long ago, often without benefit increase features.

The average assisted living facility (ALF) claim was lower on individual policies than on group policies-$16,635 versus $18,138. As many group policies have lower maximums for ALFs, which cost less than nursing homes, it seems surprising that the average group ALF claim almost matched the average group nursing home claim. The data included only 375 group ALF claims.

The average home care claim was higher on individual policies than on group policies-$12,301 versus $9,693.

Total claims paid since inception for the 18 participants exceed $19 billion, which is about 30 percent of the total claims incurred in the industry since 1991. The $19 billion in claims were weighted (by number) much more heavily toward nursing homes: home care and adult daycare-30.9 percent, ALFs-11.5 percent, and nursing homes-57.6 percent.

The average claim paid since inception is much higher than the average claim paid last year because the average since inception reflects people having been on claim for more than one year. The average claims since inception are more statistically significant. For each type of claim, the individual average size is substantially larger than the group average size as shown in Table 1 (on page 4). The individual claim average exceeds the group average by a higher percentage for ALFs and for home care than for nursing home care because group policies have insured a lower maximum benefit for ALFs and home care than for nursing home care.

• An estimated 67 percent of policies issued in 2010 would have been partnership-qualified if all states had partnership programs that followed the Deficit Reduction act guidelines. More than 80 percent of sales are partnership-qualified in five states, but the average for all DRA partnership states is lower because implementation is not yet complete in all states.

• Life/LTCI and annuity/LTCI hybrid, combination or linked products are growing. This growth is due to their pricing stability compared to past stand-alone LTCI policies, attractiveness compared to low-yielding certificates of deposit, and benefits paid upon death or lapse. These products can be part of a person’s plan for long term care, may supplement stand-alone LTCI, and are likely to be much less impacted by CLASS. If interest rates rise sharply in the future, a major 1035 tax-free exchange to the hybrid annuities market might develop.

• Multi-life sales (individual policies sold through employers or other groups) accounted for about 25 percent of new policies sold in 2010. Look for the August 2011 issue of Broker World magazine for more analysis.

Market Perspective
The economy seemed to depress sales in 2009, but sales bounced back a bit in 2010 after the health bill passed. In early 2011, sales appear to be increasing further.

• The government’s intention to launch a government-run LTCI program (CLASS) in 2013 is stimulating worksite sales. The government intends to spend $93 million to promote CLASS, which most everyone agrees will increase private LTCI sales in the short run. However, long-range prognostications about CLASS range from a permanent boost to total elimination of the industry. Some believe the private LTCI industry will gravitate to selling policies which supplement CLASS, but there are many significant hurdles that would have to be overcome.

• An estimated 67 percent of the policies issued in 2010 would have been partnership-qualified if all states had partnership programs that followed the Deficit Reduction Act guidelines. More than 80 percent of sales are partnership-qualified in five states, but the average for all DRA partnership states is lower because implementation is not yet complete in all states.

• Life/LTCI and annuity/LTCI products (often referred to as hybrid, combination or linked products) are growing. This growth is due to their pricing stability compared to past stand-alone LTCI policies, attractiveness compared to low-yielding certificates of deposit, and benefits payable upon death or lapse. These products can be part of a person’s plan for LTC, may supplement stand-alone LTCI, and are likely to be much less impacted by CLASS. If interest rates rise sharply in the future, a major 1035 tax-free exchange to the hybrid annuities market might develop.

• Multi-life sales accounted for about 25 percent of new policies sold in 2010. (Look for the August issue of Broker World magazine for more analysis.)

• In 2010, the industry shifted toward less expensive policy designs. As detailed in the Statistical Analysis section: The percentage of lifetime benefit period policies dropped from 15.2 percent to 13.2 percent. The percentage of policies issued with elimination periods of 90 or more days increased from 76.1 percent to 80.5 percent. The average maximum daily benefit purchased increased slightly, but the benefit increase provisions were less robust, resulting in a 2 percent decrease in the projected maximum daily benefit at age 80 for someone who buys at age 58, the average issue age in 2010.

Partnership Programs. As of January 1, 2011, the participants sold partnership products in an average of 24 states (up from 18 states a year ago and 11 as of January 1, 2009). One company did not sell partnership policies anywhere; at the other extreme, two reported offering partnership policies in 33 of the 39 states which now permit partnerships and three reported selling in 32 states.

Implementation continues. Minnesota led all states with 86 percent of its policies being partnership-qualified followed by North Dakota with 84.5 percent; Virginia, 82.9 percent; Wisconsin, 81.1 percent; and Nebraska, 80.5 percent.

Because of differing laws, the original partnership states lagged in this regard: California-40.9 percent, Connecticut-39.5 percent, Indiana-53.4 percent, and New York-31.0 percent. Of the companies that participated in this year’s survey, only three sell partnership policies in California, whereas eight sell partnership policies  in Connecticut (the original partnership states). Furthermore, the percentage of total policies (partnership and non-partnership combined) sold in the four original partnership states has dipped from 19.4 percent in 2007 to 18.2 percent in 2010, perhaps because of the new partnerships. Of interest is that sales increased steadily when these four states were the only ones with partnership programs. Perhaps LTCI sales could be increased if these states adopted the new partnership rules.

If states had DRA-type partnership programs, it is estimated that 67 percent of the policies issued in those states during 2010 would have been qualified. This estimate was arrived at by (1) calculating how many policies issued at ages under 61 had permanent level premium, compound increases of 3 percent or more, or had a permanent level-premium CPI feature (64 percent); (2) adding in those policies with 5 percent simple for ages 61-75; and (3) recognizing that all policies above issue age 75 would qualify. In a few circumstances, these policies would not qualify in a DRA-partnership state, but we think there are more situations where we have not counted policies which would qualify.

Statistical Analysis
As noted earlier, MetLife and Northwest­ern Mutual, as well as all the carriers whose products are displayed in this survey, have contributed to the following statistical analysis. Some insurers were unable to contribute data in some areas.

Sales characteristics vary significantly from one insurer to another. Hence, variations in results from one year to the next may reflect a change in which insurers participate in the survey as well as any underlying change in the industry’s sales patterns.

• Market Share
The number four carrier in 2009 (measured by new annualized premium) discontinued sales late in 2010 and the number one carrier for 2009 increased prices substantially in the second half of 2010. As a result, there was a major shift in sales by carrier, but it is largely masked by 2010 full-year data. Thus, the top two carriers produced 54 percent of the survey’s estimate for the entire industry (temporarily up from 47 percent last year) and the top 10 produced 88 percent (up from 84 percent last year).

Table 2 lists the top 10 participants in terms of new paid annualized 2010 individual premium. John Hancock barely held on to first place, but will drop in 2011. Mutual of Omaha/United of Omaha and Prudential showed the most growth compared to 2009. MetLife will drop off the table in 2011 and Berkshire will drop in 2012; thus, significant shifts in market share will occur in the next two years.

• Characteristics of Policies Sold
Average Premium and Persistency. Ignor­ing single premium sales, the average new policy premium increased 1.6 percent, from $2,182 in 2009 to $2,218 in 2010. The lowest average size premium among participants was $1,111 and the highest was $4,207. The average premium per new purchasing unit (i.e., one person or a couple) increased from $3,078 to $3,259. The average in-force policy premium for participants decreased from $1,840 to $1,815.

Issue Age. The average issue age (57.9 in 2010) has fluctuated between 57.7 and 58.1 since 2006. Table 3 shows that the percentage of sales in the 55 to 69 range has grown each of the past two years, with a reducing percentage of sales below age 55 and above 69. Few carriers issue above age 79. Table 4 shows more detail.

Benefit Period. Table 5 documents the continuing drop in lifetime benefit period (BP) sales since 2004, when 33.2 percent of the policies sold had a lifetime benefit period. Five carriers do not offer a lifetime benefit period, yet six carriers reported those sales were more frequent than any other benefit period for 2010.

Shorter benefit periods (two years or less) were less common in 2010 than in the past four years. However, a major carrier is just releasing a one-year benefit period and the partnership programs should encourage more such plans.

Three- and four-year benefit periods accounted for 42.4 percent of the sales, up from 39.4 percent.

The average length of fixed benefit period policies dropped 1.4 percent, but remained 4.2 years, which under-values the coverage sold because of the shared care factors discussed below.

Most shared care policies allow a claimant to dip into the spouse’s policy if he has exhausted his own policy. If two four-year BP policies are shared, each is counted as a four-year BP policy in this study. While the combined benefit period is limited to eight years, either insured could use more than four years, and that added value is not reflected in the statistic.

Some shared care policies maintain independent coverage for each insured, but add a third pool that either insured could use. If the base coverage is four years, the survey classifies them as four-year policies, but either person has access to eight years of benefit, and the total maximum is 12 years.

Partly offsetting these understatements of protection is an overstatement when an eight-year joint shared policy is sold. Each insured is then counted as having an eight-year benefit period, but together they have only eight years.

Maximum Daily Benefit. The average maximum daily benefit is about $155 per day. This year, the $200-plus initial maximum daily benefit (MDB) category was subdivided. Also the less than $50 and $50-$99 categories were combined because $1,500 per month policies were being classified as less than $50 (see Table 6). If multi-life is excluded, the percentage of sales below $100 per day drops from 12 to 11 percent.

Benefit Increase Features. After holding steady in the past, sales plummeted in 2009 and 2010 for permanent 5 percent compound increases with premiums intended to stay level. They dropped 6.4 percent (arithmetically) in 2009 and 6.3 percent in 2010. Permanent simple 5 percent increases have fallen steadily, but more slowly, for four years.

Those options have been replaced by level premium options with permanent CPI increases and by other compound benefit increases, most notably 3 percent, as shown in Table 7.

More than one-fourth (25.5 percent) of the policies had no benefit increase feature or a future purchase option or a deferred benefit increase option.

The deferred compound option allows purchasers to add a level premium compound benefit increase within five years of issue if they have not been on claim. If clients exercise those options, policy benefits will approach those of level premium permanent fixed increase policies. If clients do not exercise those options, these policies become no benefit increase policies.

Based on data from five participants, 27 percent of 24,910 people exercised future purchase options that were available in 2010. The percentages varied from 9 to 43 percent by insurer. Percentage elections are likely to decrease as people age, because the cost of each election increases dramatically (both the amount to purchase and the price per unit increase) and the buyer gravitates toward fixed income.

Elimination Period. The percentage of policies with 30-day or shorter facility elimination periods (EP) dropped from 12.2 to 8.7 percent, sharply accelerating a trend. However, 26.6 percent of the policies included a zero-day home care EP coupled with a longer facility EP. Many policies in the 31 to 89 day category have 84-day EPs, so we intend to broaden the 90 to 100 day category to 84 to 100 days next year (see Table 8).

Sales to Couples and Gender Distribution. Sixty-one percent of buyers were part of couples who both bought in 2010, 16.5 percent were reported as one-of-a-couple purchasers, and 22.5 percent were reported as single.

One-of-a-couple discounts help retain the healthy spouse when the other spouse is declined, thereby salvaging the underwriting investment and pleasing distributors. Overall, 35.1 percent of the couples in 2010 were reported to insure only one person; however, that is understated because carriers that don’t offer one-of-a-couple discounts classify such buyers as single people. Companies with one-of-a-couple discounts that were on the order of half the both-buy discount reported that 40.5 percent of couples insured only one person. Yet companies with the less attractive one-of-a-couple discounts reported that 27.8 percent of couples insured only one person.

A few insurers were able to share data which showed that when one partner was declined, approximately two-thirds of the well spouses accepted their policies.

Overall, our analysis suggests that 58 percent of buyers are women, but 71 percent of single people who buy are female. Generally, a higher percentage of single buyers are women than of one-of-a-couple buyers.

Shared Care and Other Couples’ Features. In 2010, 41 percent of couples who both bought limited benefit period policies (eligible couples) purchased shared care; 44.8 percent bought shared care if it was offered by the insurer.

Some products offer (or include automatically) joint waiver of premium (premium waived for both insureds if either qualifies) and/or survivorship features that waive premiums for a survivor after the first death if specified policy conditions are met. In 2010, 23.1 percent of policies sold to couples-both-buying included joint waiver of premium and 24.6 percent included survivorship.

Existence and Type of Home Care Cover­age. Four participants reported home care only policies, which accounted for 3.3 percent of sales. Although nine participants reported 2010 sales of facility only policies, those policies accounted for only 1 percent of total sales.

More than 97 percent (97.5 percent) of the comprehensive policies included home care benefits at least equal to the facility benefit.

Most policies (57.6 percent) use a weekly or monthly reimbursement design, while 38.2 percent use a daily reimbursement home care benefit. Thus, 95.8 percent use a reimbursement method. Indemnity (2.2 percent) and cash/disability (2.0 percent) are becoming less common and well over 80 percent of the 2010 indemnity benefits were sold by carriers that will have stopped offering the feature by the end of 2011.

Partial cash alternative features are becoming popular. In lieu of any other benefit that month, these features allow policyholders to use a percentage of their benefits (between 33.3 and 50 percent) for whatever purpose they wish. Nearly ten percent (9.6 percent) of 2010 policies included a partial cash alternative feature.

Other Characteristics. Fewer than 2 percent (1.7 percent) of the policies included return of premium features, which return some or all premiums (usually reduced by paid LTCI benefits) when a policyholder dies, sometimes only after a defined number of years or before a particular age. About 93 percent of those provisions were elected options requiring additional premium.

Fifteen percent of the policies included restoration of benefits (ROB) provisions, which restore used benefits when the insured does not need services for at least six months. Slightly more than half of the ROB features were automatically included.

Fewer than 2 percent (1.4 percent) included a shortened benefit period (SBP) non-forfeiture option. SBP makes limited future LTCI benefits available to people who terminate coverage after three or more years.

As anticipated, the percentage of policies issued on a non-tax-qualified (NTQ) basis dropped below 1 percent. Only 4.2 percent of our participants’ in-force policies are NTQ.

Limited Pay. Single premium sales more than tripled from 21 policies to 72 policies, while the premium jumped eightfold to $3.5 million. However, two of the three insurers that sold single premium policies in 2010 have temporarily stopped doing so in 2011 due to the low interest rate environment.

In 2010, 1.9 percent of policies were issued on a ten year pay basis and .4 percent on a pay to age 65 basis. Only .1 percent used all other non-level premium patterns combined. The other 97.6 percent of the policies use lifetime premium payment. Limited pay policies are much more expensive than in the past and the likelihood of future premium increases on lifetime pay policies has substantially reduced. Nonetheless, four participants have raised rates on policies filed under rate stabilization laws.

• Underwriting Data
Case Disposition. In reviewing this section, please note:

• Placed percentages reflect the insurer’s perspective; a significantly higher percentage of applicants is offered coverage because applicants who are denied by one carrier are often issued coverage by another carrier.

• If a carrier accepts 70 percent of its applicants without modification but issues joint policies, it might issue only 49 percent of its couples’ applications without modification, since either applicant might not be acceptable in the applied-for class.

In 2010, 66.9 percent of applications were placed, an improvement back to 2008 results, despite a slight dip in those issued as applied for. The declination rate continued to rise-up to 20.1 percent (see Table 10). Fewer applications were suspended, withdrawn, not accepted or returned during the free look period.

Of the issued cases, 4.8 percent were modified, rather than issued as applied for.

All carriers declined between 15 and 30 percent of their applicants except two carriers-one at 13.1 percent and another at 34.6 percent.

For the first time, we can split out some business issued on a simplified underwriting basis. Removing such business exposes that the decline rate for fully underwritten business was 20.5 percent.

Underwriting Tools. Table 11 shows the percentage of companies that used each underwriting tool and the reported percentage of applications that were underwritten using that tool. The increased use of medical records should reduce the risk of future rate increases. Medical Inspection Bureau (MIB) and prescription profile usage is likely to increase.

Underwriting Time. Table 12 shows that average reported time from receipt of application to mailing of the policy has increased significantly in the past two years. The average processing time was 31 days in 2010, but three-quarters of the insurers reported average processing time of fewer than 30 days. Two carriers reported averages more than 40 days, skewing the average.

The increase in processing time from 2008 to 2009 was largely attributable to a change in participating insurers. However, in 2010 almost all companies reported longer processing times-mostly longer than in 2008. Increased use of medical records is important for sound underwriting, but contributes to longer processing times.

Rating Classification. A higher percentage of cases were issued in the most favorable rating classification (47.3 percent) than in many years, even though most carriers issued a lower percentage in that classification in 2010 than 2009.

The percentage rated in the best rating classification varies from 8 to 100 percent among carriers, and the percentage rated in the third-best (or worse) rating classification varies from zero to 69.7 percent. Six participants placed 21 to 30 percent of their applicants in their most favorable classification, and seven placed 40 to 55 percent in their most favorable classification. Only two carriers placed fewer than 85 percent of their cases in their two most favorable rating classifications (see Table 13).

Product Details
This section describes and summarizes, row-by-row, the information displayed in the exhibit. Because many features cannot be fully described in limited space, please seek more information from insurers, as appropriate. The abbreviations in the exhibit include the following (see Table 14 on page 23).

• Company Name (rows 1 and 56) lists the participating carriers in alphabetical order at the top of each page. Each company could display as many as three products.

• Policy Type (row 2) distinguishes between comprehensive, home care only and facility only products. However, some products are listed as comprehensive, yet are available as facility only and/or home care only as well. Between row 2 and the “Comment” rows (55 and 105), seven carriers are identified that offer facility only coverage and three carriers that offer home care only. For the first time, we are including three products sold exclusively in the worksite, and they all are comprehensive policies.

A product is identified as “Disability” (full benefit if someone becomes chronically ill) if it is always sold that way for all levels of care. There is one such disability product this year. There are no products with a 100 percent disability option, but three products offer indemnity coverage (full benefit if someone is chronically ill and incurs a qualified cost) for a higher premium (see row 38).

Where appropriate, we have inserted indicators such as “Disability,” “Facility Only” to indicate why a particular row might not apply to that product.

• Product Marketing Name (rows 3 and 57) is the product’s common brand name.

• Policy Form Number (row 4) is generic and may vary by state.

• Year First LTCI Policy Offered (row 5) is the year the insurer first offered individual LTCI coverage. If group LTCI was sold earlier, that group date is also shown.

• Year Current LTCI Policy Was Priced (row 6) is the year the current product was most recently priced.

• Jurisdictions LTCI Available (row 7) generally shows the jurisdictions in which the insurer sells, or intends to sell, LTCI. A displayed product may not be available in all of these states.

• State Partnerships (row 8) identifies the number of state partnerships in which the insurer participated as of January 1, 2011, and specifically identifies any of the original four state partnerships (CA, CT, IN and NY) in which the insurer participates.

• Financial Ratings and Ranking (rows 9-14) lists each company’s ratings from the four major rating agencies (A.M. Best, Standard & Poor’s, Moody’s, and Fitch) and its COMDEX ranking as of May 1, 2011.

The COMDEX ranking is from VitalSigns, a publication of EbixLife, Inc. EbixLife converts each company’s A.M. Best, Standard & Poor’s, Moody’s, and Fitch ratings into a percentile ranking. For insurers rated by at least two of these rating agencies, EbixLife produces a COMDEX ranking by averaging that insurer’s percentile rankings.

The COMDEX ranking has two key advantages: it combines the evaluations of several rating agencies and its percentile ranking makes it easier to understand how a company compares to its peers.

• Financials (rows 15-18) reflect the insurer’s statutory assets and surplus (in millions) for year-end 2010, and the percentage changes from year-end 2009. These figures do not include assets and surplus of related companies nor do they reflect assets under management.

• LTCI Premium (rows 19-22) lists (1) the annualized premiums (in millions) for policies sold in 2010, (2) policies in-force on December 31, 2010, and (3) the percentage changes from the previous year. If single premium sales are included in the annualized premium, the amount of single premium is disclosed parenthetically.

• LTCI Lives Insured (rows 23-26) counts joint LTCI policies twice, because two lives are covered in such policies. The number of lives c

July 2010 LTCI survey

This 2010 Individual Long Term Care Insurance Survey is the twelfth consecutive annual review of individual long term care insurance (LTCI) published by BROKER WORLD magazine. This year’s survey was conducted by Milliman, Inc.
 The survey’s objectives are to provide a consolidated comparison of available products, report data regarding sales and analyze the changing LTCI marketplace.

Highlights From This Year’s Survey
 • LTCI annual premium for individual policy sales decreased in 2009. Twenty participating carriers sold 196,370 policies for $428,506,015 of new paid annualized stand-alone LTCI in 2009—20 percent fewer policies and 21 percent less annualized premium than the same 20 carriers sold in 2008. These sales figures do not include sales from future purchase options or upgrades on existing policies.
 • The industry sold 21 single premium policies for a total of $432,766, most of which was sold by carriers participating in this survey. Single premium sales more than doubled compared to 2008.
 • We estimate that the entire LTCI industry sold 225,000 annual premium individual policies for $480 million of annualized premium, down 24 percent from 2008. Carriers participating in this survey represent 90 percent of 2009 sales. Approximately 7 percent of 2009 sales were made by companies which have discontinued selling LTCI. The balance was sold by insurers that still sell LTCI but chose not to participate in this survey.
 • Survey participants covered 3,303,339 lives on in-force individual policies, up 1.7 percent. In-force annualized premium increased to a greater degree (4.2 percent) because of (1) older policies with lower premiums terminating, (2) future purchase options and other increases in coverage being added, and (3) premium increases on new and in-force business.
 • Fifteen participants reported having paid over $2.3 billion ($2,310,659,767) in 2009 and over $15 billion ($15,040,407,735) since they’ve been in the LTCI business. Clearly the LTCI industry has made a big difference for many families.
 • Claims distributions for 2009 were as follows: nursing homes—44.4 percent; assisted living facilities—14.1 percent; and home care and adult day care—41.5 percent. The dollar amount of 2009 claims was distributed as follows: nursing homes—45.5 percent; assisted living facilities—24.9 percent; and home care and adult day care—29.6 percent. Of course, industry-wide, the percentage of nursing home claims is significantly higher because carriers that are out of the business have a higher percentage of older facility-only coverages than our participants.
 • The original four partnership states (CA, CT, IN and NY), which produced 100 percent of partnership sales as recently as 2006, produced only 26 percent of partnership policies in 2009. However, the four original states produced 31 percent of partnership premium, presumably because the cost of facility care tends to be higher in those states. For more partnership data, see the “Market Perspective” section on page 38.

About the Survey
 The survey displays information on 35 products from 19 carriers. American General is new to the industry and survey in 2010. On the other hand, Allianz, Equitable L&C, and Minnesota Life, which contributed to the 2009 survey, have discontinued sales, hence did not participate this year. Other companies which discontinued sales in 2009 include the Great American family (Great American, Loyal American, and United Teachers Associates) and UnitedHealth Care. UNUM, a long term contributor to these surveys, discontinued individual LTCI sales in 2009, but continues to be a major player in the group LTCI market. Northwestern’s product is not displayed, but it has contributed to the industry statistical analysis herein.
 Only three carriers (American General, Bankers Life and Casualty, and State Farm) are displaying new products this year; however, several carriers modified their programs (most commonly, the design of their multi-life programs), while continuing to sell the same policy forms.
 This article is arranged in the following sections:
 • Market Perspective provides insights into the individual LTCI market.
 • Statistical Analysis presents industry-level sales characteristics.
 • Product Details provides a row-by-row definition and analysis of the product exhibit.
 • Premium Exhibit Details explains the basis for the product-specific premium rate exhibit.
 Unless otherwise noted, the data does not include group LTCI, combination products or sales outside the United States.

Market Perspective
 • With the exception of 2007, sales of individual LTCI have been in a slump for several years. LTCI is viewed as an expensive buying decision, one that can be delayed amid economic instability and uncertainty regarding the country’s health care financing.
 • The economic crisis has encouraged a greater amount of saving and a greater awareness of the need for protection against future economic uncertainty. As the economy rebounds and people become more confident of being able to commit to an ongoing LTCI premium, a rebound in LTCI sales could occur.
 • Health care reform legislation in 2010 included the CLASS Act, which establishes a government-run LTCI program beginning in 2013. Many younger prospects might be inclined to “wait and see” what happens in 2013. Other people may view such a program as the first step of increasing government commitment. They may justify ignoring their potential LTC needs on the theory that, by the time they need care, the government will provide their care for free or on a subsidized basis.
 • As of January 1, 2010, the participants sold partnership products in an average of 18 states (up from 11 states a year ago). The range increased from zero to 20 last year to zero to 28 states as of January 1, 2010.
 • Sixty-three percent of the policies in the new partnership states were partnership policies, whereas only 41 percent of the policies in the original partnership states were partnership policies. Some participants reported 100 percent partnership sales in some jurisdictions. The partnership percentage in the new states will increase for at least one reason—in portions of 2009, these policies were not yet available in some of the new participating states. (In states in which the new partnerships were effective prior to July 2008, 67 percent of the 2009 policies sold were partnership, whereas in the states where the partnership became effective between July 2008 and June 2009, only 59 percent of the sales were partnership policies.) In the new states, the average premium was 25 percent higher than the average non-partnership premium, whereas this differential was only 4 percent in the original states. The differences mentioned in this paragraph are attributable to the fact that many policies with level premium compound benefit increases do not count as partnership policies in the original participating states.
 • Despite the advent of the new state partnerships, the 2009 data shows some signs of benefit increase provisions shifting toward fixed future purchase options and the no increase option. More information about this aspect of LTCI is described in the “Statistical Analysis” section.
 • Multi-life sales (individual policies sold through employers or other groups) accounted for 25.7 percent of new policies sold in 2009—more than twice the 2007 percentage. The average premium for association business is $2,053 and for employer business is $1,813, compared to an average premium of $2,182 for all sales included in this survey.
 • Business tax incentives should become even more attractive as most people expect income tax and payroll tax rates to increase. However, individual tax incentives will reduce with the threshold for deductibility of medical and dental expenses increasing to 10 percent in 2013 (later for seniors).
 • The Pension Protection Act of 2006 ushered in some potentially key changes as of January 1, 2010. The expansion of 1035 exchanges should spur the sales of single premium life/LTCI combinations, annuity/LTCI combinations and single premium stand-alone LTCI. It may also spur the funding of inforce and new LTCI policies with payouts from existing or new immediate and deferred annuities.

Statistical Analysis
 In reviewing the statistical trends revealed below, it is important to recognize that characteristics of sales vary significantly from one insurer to another. Hence, variations in results from one year to the next may reflect a change in which insurers participate in the survey as well as an underlying change in the industry’s sales patterns.

• Market Share
 This trend toward market share consolidation among the largest carriers stalled somewhat in 2009 (perhaps temporarily). The top two carriers’ market share (in terms of premium) increased from 46 to 47 percent, but the top three carriers produced 55 percent of first-year premium, compared to 57 percent in 2008. The top 10 carriers (shown in Table 1) constituted 84 percent of the market individual LTCI.
 Table 1 lists participants that sold more than $10 million of new paid annualized individual premium in 2009. John Hancock passed Genworth in 2009, and Northwestern passed MetLife for third position. Mutual of Omaha and Berkshire also moved up.

• Characteristics of Policies Sold
 Average Premium and Persistency. Ignoring single premium sales, the average premium per new policy dropped 1.3 percent from $2,210 in 2008 to $2,182 in 2009, reversing a long term trend of increasing average premium. The range narrowed, the lowest average premium/policy for a participant being $1,074, while the highest was $3,843. The average premium per new purchasing unit (i.e., one person or a couple) also decreased from $3,174 to $3,078.
 The year-end in-force premium represents 97 percent of the sum of participants’ prior year in-force premium plus their 2009 sales. The same calculation for number of lives insured was 95.7 percent. Our calculation understates persistency of the previous year’s in force because we presume that no 2009 sales terminated by year end. The average in-force policy premium for participants increased from $1,803 to $1,840. These premium figures reflect premium increases on in-force policies and the exercise of future purchase options.
 Issue Age. Average issue age increased back to the 2006-2007 range, indicating that last year’s number apparently was an aberration (see Table 2). Approximately 75 percent of the insurers who participated both last year and this year reported an older age distribution in 2009, with an overall age increase of 0.7 years among those carriers. The increase in issue age is particularly noteworthy given the increase in multi-life sales.
 As shown in Table 3, the percentage of sales at ages under 35 and from 60 through 69 were greater than in either 2007 or 2008.
 For in-force policies, the average issue age was 60.7, down 0.1 from 2008.
 Benefit Period. Despite the data in Table 4, lifetime benefit period (BP) continued to be less common. The increase in lifetime BP from 12.4 to 15.2 percent of sales is attributable to a change in carriers contributing to the survey. For companies that participated in both the 2009 and 2010 surveys, lifetime BP sales dropped from 11.5 percent of sales to 10.4 percent of sales.
 Similarly, the change in carriers muted the increase in short BPs. Among carriers that contributed in both years, the percentage of policies issued with a three-year or shorter BP increased from 38.2 to 41.1 percent.
 The average BP of fixed-benefit period policies dropped slightly to 4.2 years.
 Most policies issued with a shared care feature cause the average BP to understate the amount of protection that has been issued. If two four-year BP policies are shared, each is counted as a “four-year” BP policy. While the combined benefit period is limited to eight years, either insured could use more than four years, so the value of the coverage is understated.
 When a couple purchases four-year BP policies and a third pool with an additional BP of four years, they are also counted as “four-year” policies, but either person has access to as much as eight years of benefit, and the total maximum is 12 years. However, there is an overstatement in protection when an eight-year joint shared policy is sold; each insured is counted as having an eight-year benefit period, but together they have only eight years.
 Three participating insurers offer BPs of less than two years, other than as may be required in original partnership states. At the other extreme, 74 percent of the displayed products offer a lifetime BP. In 2004, 97.5 percent of the displayed policies offered a lifetime BP.
 Nonetheless, seven carriers reported that lifetime benefit period sales were more frequent than any other benefit period.
 Maximum Daily Benefit. As shown in Table 5, the percentage of sales with $200 or more maximum daily benefit continues to increase. Next year, we’ll subdivide the “$200 and above” sales. The apparent increase in sales between $50 and $99 is attributable to a change in the participating insurers this year. The average maximum daily benefit continues to be about $150 a day.
 Benefit Increase Features. Despite the increasing availability of partnership policies, sales in 2009 showed some weakening in the quality of inflation protection, but to a much lesser degree than Table 6 suggests. Despite the economy, increasing prices (particularly for benefit increase features) and new products promoting less robust benefit increases, the distribution of sales remained surprisingly weighted to robust benefit increase features in 2007 and 2008.
 In 2009, sales from carriers that participated in both the 2009 and 2010 surveys shifted toward “fixed future purchase options” and “no increase option” (combined, those categories increased from 18.2 percent to 20.1 percent of sales) and away from lifetime level premium increases (5 percent compound, 5 percent simple and CPI sales, which, on a combined basis, dropped from 75 percent to 72 percent of sales).
 This year’s “other” category consists of deferred benefit increase features sold by three carriers. These features allow purchasers to add a level premium compound benefit increase within five years of issue as long as they have not been on claim. To the degree that clients do not exercise those options, these policies essentially belong in the “no increase” category. On the other hand, to the degree that clients exercise those options, the policies will approach level premium permanent fixed increase policies in terms of performance.
 A shift in statistical contributors this year caused a large increase in FPOs and a decrease in sales of step-rated products (premiums increase when benefits increase in the future, but much less steeply than with attained age pricing).
 Elimination Period. The average facility elimination period (EP) for new policies dropped from 84 days in 2008 to 82.3 days in 2009, due to a change in distribution of carriers, which caused the large increase in policies issued with a 31-89 day EP shown in Table 7. The percent of policies that were issued with a zero-day home care EP coupled with  longer facility EP dropped from 25 to 19.2 percent, partly due to a change in carriers participating this year.
 Sales to Couples and Gender Distribution. Fifty-seven percent of buyers were couples both buying in 2009 compared to 60.7 percent in 2008. Another 17.6 percent were reported as a one-of-a-couple purchase, compared to 16.5 percent in 2008. The remaining 25 percent (22.8 percent in 2008) were reported to be single.
 One important point is that most companies that do not offer one-of-a-couple discounts cannot separate such sales from sales to single people. Carriers that offer one-of-a-couple discounts reported that 56.6 percent (versus 58.1 percent in 2008) of buyers were part of a couple both of whom bought, while 18.7 percent (21.0 percent in 2008) were one-of-a-couple sales and 24.7 percent (20.8 percent in 2008) were single people. Those couples where only one buys probably gravitate toward insurers with a one-of-a-couple discount. The one-of-a-couple discount may help salvage cases in which one spouse is declined.
 Overall, our analysis suggests that 58 percent of buyers are women. The percentage ranged from 54 to 61 percent by carrier.
 Shared Care and Other Couples Features. Nine companies each reported more than 100 couples buying shared care. Four carriers sold shared care to more than 50 percent of the couples who both bought limited benefit period policies (eligible couples). Overall, 42.4 percent of eligible couples purchased shared care; 46.2 percent when shared care was offered by the insurer.
 Some products include joint waiver of premium (premium waived for both insureds if either qualifies). Others offer survivorship features that waive premiums for a survivor after the first death if specified policy conditions are met.
 In 2009, 26.8 percent of the policies sold to couples-both-buying included joint waiver of premium and 21.2 percent included survivorship. Joint waiver of premium was a little less popular than in 2008, but survivorship dropped off sharply, probably because of a change in distribution of sales among insurers.
 Existence and Type of Home Care Coverage. Although 10 participants reported 2009 sales of facility only policies (compared to 13 last year), these policies accounted for only 1.1 percent of total policies sold.
 Only four participants reported home care only policies, which accounted for 5.4 percent of sales. Ninety percent of the comprehensive policies sold had a home care benefit at least equal to the facility benefit. Most of the other comprehensive policies had a 50 percent home care benefit.
 Overall, only 1.8 percent of the sales were non-tax-qualified (NTQ). Six contributors sold NTQ policies in 2009, two of which increased the portion of their sales which were NTQ. One carrier sold more than 75 percent of its policies on an NTQ basis and two others sold close to 10 percent as NTQ. Participants reported that 4.6 percent of the in-force policies are NTQ.
 Thirty-six percent (up from 31 percent in 2008) of the policies with home care benefits use a daily reimbursement home care benefit and 58 percent (down from 62 percent) use a weekly or monthly home care reimbursement benefit, reversing a trend away from daily reimbursement. Three and one-half percent (compared to 4.4 percent in 2008) use an indemnity home care benefit and 2.1 percent (down from 3 percent) use a cash home care benefit.
 Limited Pay. In 2009, 10-year-pay accounted for 2.1 percent of the policies, continuing the decreased popularity of 10-year-pay. Pay-to-age-65 accounted for 0.33 percent, half-pay-after-65 accounted for 0.05 percent, 20-year-pay accounted for 0.02 percent, single pay accounted for 0.01 percent, and another 0.06 percent represented other unique premium patterns. The other 97.4 percent of the policies use lifetime premium payment. The proportion of premium that comes from limited pay policies is much larger than the proportion of policies.
 Distributors. Carriers reported that 38.4 percent of the new policies in 2009 were sold by brokers (down from 42.3 percent in 2008), 47.2 percent were sold by captive agents (up from 40.4 percent), 13.4 percent were sold through their broker/dealer channels (down from 16.2 percent), 0.5 percent were sold on a direct response basis (down from 0.8 percent), and 0.4 percent were sold through banks and credit unions (up from 0.3 percent). By comparison, 69.2 percent of the in-force policies were sold by captive agents. Much of the differences from last year are attributable to a different group of participants this year.
 Caution: Carriers are not necessarily able to classify distribution in the fashion a reader might expect. If a financial planner sells a policy through a brokerage general agent, such a policy is likely coded as a sale by a broker.

• Underwriting Data
 Case Disposition. In reviewing this section, please note:
 • Many applicants apply to multiple carriers, but they end up buying coverage from one insurer. The placed percentage quoted below reflects the quoting insurers’ perspective; the percentage of applicants who are offered coverage is significantly more favorable.
 • If a carrier accepts 70 percent of applicants without modification, but issues joint policies, it likely would issue only 49 percent of its couples’ applications without modification since either applicant might not be acceptable in the applied-for class.
 In 2009, 64.7 percent of applications were issued and placed, a dip from 66.9 percent last year. The declination rate rose from 18.3 to 19.9 percent. Another 15.3 percent of applications (compared to 14.8 percent) were either withdrawn during the underwriting process, not taken at delivery, or surrendered within the 30-day free look period.
 Of the issued cases, 3.9 percent were reported as modified, rather than being issued as applied-for. However, several companies were unable to identify such cases; hence this figure is understated.
 The 17 participants that reported decline percentages ranged from 13.8 to 33.9 percent declined, with seven carriers between 15 and 20 percent, and 5 between 20 and 25 percent.
 The participants placed between 39.4 and 75.7 percent of their applications. Four carriers placed between 55 and 60 percent and eight placed between 65 and 70 percent.
 Underwriting Time. As shown in Table 8, the reported time from receipt of application to mailing of a policy increased significantly, even though  more carriers reported faster processing in 2009 than reported slower processing. Nearly two-thirds of the insurers reported an average processing time of 23 to 30 days.
 Underwriting Tools. Table 9 shows the percentage of companies which used each underwriting tool and the reported percentage of applications that were underwritten using that tool. Changes in contributing carriers produced changes in underwriting tool usage compared to last year.
 Rating Classification. The percentage of issued cases assigned to each rating classification is shown in Table 10. The increase in cases in the best underwriting class (increasing from 40.0 percent in 2008 to 44.4 percent in 2009) is almost entirely due to change in the carriers that contributed to the statistical survey. The percentage of substandard issues increased compared to 2008 but is still lower than in previous years.
 Rating class distributions vary greatly among carriers. The percentage rated in the best rating classification varies from 8 to 100 percent. On the other hand, the percentage rated in the third best rating classification or lower varies from 0 to 66 percent. More than two-thirds of the insurers place between 26 and 55 percent of applicants in their most favorable rating classification. All but one carrier placed at least 75 percent of applicants in its top two rating classifications.

Product Details
 This section describes and summarizes, row-by-row, the information displayed in the exhibit. Because many features cannot be fully described in limited space, please seek more information from insurers, as appropriate. The abbreviations in the exhibit are shown in Table 11.
 • Company Name (rows 1 and 56) lists the participating carriers in alphabetical order at the top of each page. Each company may display as many as three products.
 • Policy Type (row 2) distinguishes between comprehensive, home care only and facility only products. However, some products are listed as comprehensive, yet are available as facility only and/or home care only as well. Between row 2 and the “comment” rows (55 and 105), we identify nine carriers that offer facility only coverage and three carriers that offer home care only.
 We identify a product as “Indemnity” or “Disability” if it is always sold that way for all levels of care. We have no indemnity products and one disability product this year. Some reimbursement products provide some indemnity or disability benefits or options which are indicated in rows 38-41.
 Where appropriate, we have inserted indicators such as “Disability,” “Facility Only” to indicate why a particular row might not apply to that product.
 • Product Marketing Name (rows 3 and 57) is the product’s common brand name.
 • Policy Form Number (row 4) is generic; it may vary by state.
 • Year First LTCI Policy Offered (row 5) is the year the insurer first offered individual LTCI coverage. If group LTCI was sold earlier, that group date is also shown.
 • Year Current LTCI Policy Was Priced (row 6) is the year the current product was most recently priced. This row is new in 2010.
 • Jurisdictions LTCI Available (row 7) generally shows the jurisdictions in which the insurer sells, or intends to sell, LTCI. A displayed product may not be available in all of these states.
 • State Partnerships (row 8) identifies the number of state partnerships in which the insurer participated as of January 1, 2010 and specifically identifies any of the original four partnerships (CA, CT, IN and NY) in which the insurer participates.
 • Financial Ratings & Ranking (rows 9-14) lists each company’s ratings from the four major rating agencies (A.M. Best, Standard & Poor’s, Moody’s, and Fitch) and its COMDEX ranking as of May 1, 2009.
 The COMDEX ranking is from VitalSigns, a publication of EbixLife, Inc. EbixLife converts each company’s A.M. Best, Standard & Poor’s, Moody’s, and Fitch ratings into a percentile ranking. For insurers rated by at least two of these rating agencies, EbixLife produces a COMDEX ranking by averaging that insurer’s percentile rankings.
 The COMDEX ranking has two key advantages: It combines the evaluations of several rating agencies and its percentile ranking makes it easier to understand how a company compares to its peers.
 • Financials (rows 15-18) reflect the insurer’s statutory assets and surplus (in millions) for year-end 2009, and the percentage changes from year-end 2008. These figures do not include assets and surplus of related companies, nor do they reflect assets under management.
 • LTCI Premiums (rows 19-22) lists the annualized premiums (in millions) of policies sold in 2009 and, separately, of policies in-force on December 31, 2009 and the percentage changes from the previous year. If single premium sales are included in the annualized premium, the amount of single premium is disclosed parenthetically.
 • LTCI Lives Insured (rows 23-26) counts joint LTCI policies twice, because two lives are covered in such policies. The number of lives covered by new policies and by year-end in-force policies, as well as the year-to-year percentage changes, is shown.
 • Policy Ranges and EP Terms (rows 27-34) shows the product’s issue age, daily benefit, benefit period (BP) and elimination period (EP) ranges. It also explains how the EP works.
 Issue Age Range. Only two participants issue LTCI to people older than age 85.
 Daily, Weekly or Monthly Benefit Range shows the minimum and maximum policy size that will be issued. The range is shown on a weekly or monthly basis only if home care, ALF care and facility care are always sold on a weekly or monthly basis. Most policies showing a daily benefit range offer an option to determine the benefit on a monthly basis, and some issue a daily benefit for one level of care and a monthly benefit for another level of care. The cost of monthly determination of benefits can be reflected in an additional premium and also a reduction in the annual maximum benefit from 365 x the daily benefit to 360 x the daily benefit.
 Benefit Period. Most products still offer a lifetime benefit period, but three participants do not offer lifetime benefit periods. Three participants offer LTCI policies with BPs as short as one year. The partnerships may eventually make one-year BP more common.
 Elimination Period. A cumulative EP means that someone could satisfy the EP in stages. For example, if they have a 180 day EP and need qualified care for 100 days and then recover, their remaining EP would be 80 days. A vanishing EP means that once the EP is satisfied, it never has to be satisfied again. One carrier offers products with non-vanishing EPs and another offers a non-cumulative EP.
 Calendar Day EP is becoming more common. Nine insurers have products that include a calendar day EP automatically. Calendar day EP costs more than service day EP, but it has the following advantages:
 • Clarity. Unfortunately, even if clients understand service day EP today, they may forget by the time they go on claim. A calendar day EP may reduce the potential for disputes.
 • Flexibility. It is hard to predict finances, family status and preferences at the time of a future claim. Calendar-day EP allows the family to satisfy the EP with family care or perhaps informal care that would not satisfy a service day EP.
 • Policy Benefits (rows 35-47). Row 36 shows whether home care and adult day care have a different benefit pool (and EP) from facility care. The first number represents the number of benefit pools; the second represents the number of EPs. A product can have two different benefit periods but a single pool. That is, a shorter home care BP could deplete part of a longer facility BP.
 Row 37 shows how home and community based care (HCBC) benefits are determined. For policies that limit benefits to incurred expenses (reimbursement policies), monthly determination of benefit payments allows more benefit flexibility than does daily determination. With monthly determination, if less than any daily maximum is used one day, the unused amount for that day can fund additional reimbursement for a day in that month on which more than the daily maximum is spent. One policy has neither a daily nor a monthly maximum, but rather a lifetime maximum with a 20 percent co-pay.
 An indemnity provision pays the full daily benefit on days when a qualified service is incurred, even if that full benefit exceeds the qualified expense. On days when there is no qualified expense, no benefit is paid. However, the term “indemnity” has been used in a variety of ways in the LTCI industry.
 A disability provision (often called a cash benefit) pays the full benefit if the person satisfies the policy triggers, even if no qualified expense is incurred.
 Row 38 indicates whether the facility benefit is an indemnity benefit and, separately, whether the home care benefit is indemnity-based, each either automatically or optionally at additional cost.
 Row 39 shows whether a product is