LTCI: Looking Ahead
We have all heard about the market exits, pullbacks, rate increases and policy adjustments facing the increasingly volatile long term care insurance (LTCI) industry. It’s plain to see that it’s been a tumultuous few years for carriers, as what was once a $1 billion industry in the early 2000s currently stands between $300-400 million in annual sales volume.
Some take this as a sign that LTCI is on its last legs, while others simply don’t believe there should be a private LTCI market. In my opinion both camps are short-sighted. I am optimistic about 2015 and beyond, and confident that the industry will right itself. As carriers, we must remain focused on offering quality long term care solutions and improving the way we do business.
Despite fluctuations in the industry, the need for LTCI has never been greater. In fact, it’s growing due, in part, to the “perfect storm” of aging baby boomers and family caregiver shortages. Simply put, most people aren’t prepared for their long term care needs.
I’m optimistic because this need is a major opportunity to expand the private LTCI market and protect more families. This need has also driven LifeSecure’s success as one of the few carriers to experience growth over the past couple of years. While LTCI’s challenges won’t all be resolved in 2015, I believe that committed carriers will continue taking the necessary steps to meet this need and create a more stable future for LTCI.
Doing Business
Many of the problems we see in the LTCI industry today stem from decades-old product designs, pricing, lapse rate predictions and other assumptions. To put it one way, that’s the old way of doing business. Thanks to an emphasis on innovative product designs, newer pricing assumptions and investments in technology, LifeSecure has been able to overcome common pain points that many carriers and agents experienced in the industry’s early years. As many of the remaining LTCI carriers pursue similar paths, they’re also discovering the benefits of this approach—which will become even more important going forward.
Before entering the market in 2006, LifeSecure studied decades of industry experience, pricing and economic factors which we used to develop our product and business model. This allowed us to create high-quality products with contemporary pricing assumptions targeting greater stability and strong risk protection. Our online tools and resources—such as e-applications and e-signatures—have allowed us to streamline the selling and underwriting processes and attain the industry’s fastest turnaround times at an average of 10 days.
For 2015 and beyond, LTCI carriers will need a forward-thinking business model to remain nimble, flexible and easy to do business with for both agents and consumers—all of which has helped LifeSecure reach new heights in a volatile environment. Carriers must also continually look at unique and innovative approaches to long term care solutions. Introducing enhanced products that offer greater flexibility to the market, along with stronger risk protection, will allow LTCI carriers to better meet our customers’ needs and be a major part of the overall asset management and financial planning solution.
Distribution
Much of LifeSecure’s success is due in part to our strong distribution framework. We strongly support and remain committed to working with the licensed agents and brokers who distribute our products. But like any product line, LTCI is likely to continue to see distribution challenges.
A priority for insurer and agent organizations alike should be encouraging a younger generation of advisors to join the profession, which is an idea that was discussed at the recent NAILBA conference. Doing so can strengthen distribution for years to come on a number of levels. First, as the target market for LTCI skews younger, filling the advisor gap with younger professionals can help better reach that demographic. Second, current advisors may also benefit from fresh insight on how to meet the evolving expectations of younger clients, such as preferred sales approaches or the relevance of certain benefit features. Third, it will breed more subject matter experts (SMEs), which is always a benefit in our industry. LTCI doesn’t have to be complicated. In fact, designing straight-forward products with few decision points has always been a key part of LifeSecure’s business philosophy. As carriers continue to simplify their products, it’s becoming easier for SMEs to show their clients and others the value of LTCI.
Open Lines of Communication
Another major challenge continues to be cultivating a better understanding of LTCI for those outside the industry. We must work together to maintain an open dialogue with regulators and state and federal lawmakers to help them understand our needs—especially when it comes to timely responses to requests and new product approvals. We also need to strengthen year-round consumer education and awareness efforts to help all Americans understand the importance of long term care planning and the value of LTCI.
All of us—carriers and agents alike—are advocates for our industry. Getting lawmakers, regulators, consumers and other parties on the same page will help them understand how we all benefit from a strong LTCI market—from providing relief to the growing Medicaid budgets that pay for long term care services, to protecting countless families from the risks associated with long term care.
At LifeSecure we’re looking past common perceptions of LTCI and seeing the potential. We’ve experienced tremendous growth in the market and we’re focused on managing our business strategically and responsibly in order to continue our success for years to come.
The market for LTCI is there, but there is much more the industry can do to bring better products and services to the market and meet the needs of more families. We look forward to working with the entire industry to overcome these challenges and develop a much stronger and more innovative LTCI market in 2015 and beyond. [TA]
