The beginning of a new decade is a good time to pause and reflect. We have seen incredible evolution in the marketplace over the past 10 years, including significant advances in automation and digital technologies, expansion of our distribution relationships, and some dramatic shifts in the long term care (LTC) marketplace.
In 2006, the U.S. Pension Protection Act was new, allowing for the first time the tax-free funding of long term care insurance when combined with life insurance or an annuity. That ushered in a period of double-digit annual growth for asset-based LTC (ABLTC) products, as well as new carriers in the market. Along the way, product innovations, such as recurring-premium features, have made ABLTC the protection of choice today for people buying new LTC policies.
As I write this, we are in the final stretches of 2019, and I’m proud to say that we will be wrapping this decade with one of our best sales years ever at OneAmerica®, accompanied by continued strong financial performance. We’re thankful to all our distribution partners for their role in our success, and we look forward to continuing to grow our relationships in 2020 for the long term.
We’re coming off a year of product changes that, while prompted by the 2017 CSO tables, resulted in more streamlined product offerings. We’ve preserved features like lifetime benefits, joint protection, and flexible premium options, as well as flexible funding options including using annuities or qualified funds for ABLTC protection. We know any product changes take time for adjustment, and so as we look into 2020, our commitment is to continue to listen to the marketplace, find and implement opportunities to refine our customer experience, and tell the stories of the difference ABLTC protection can make as part of a solid retirement strategy.
With our customers and their loved ones in mind, we’re also working to expand understanding and awareness of the need for planning, through collaborations like the NAIFA Limited & Extended Care Planning Center and our national initiative with the Alzheimer’s Association. Both of these focus on sharing messages of hope and of the importance of planning for every possibility.
In 2020, we’ll continue to grow these relationships and others, and we invite financial professionals to join us and follow OneAmerica on LinkedIn, Twitter, Facebook or Instagram for the latest news on our collaborations.
Certainty over uncertainty
One of our imperatives is to provide certainty to financial professionals and their customers, even in times of economic uncertainty. The most significant headwind for the industry heading into 2020 is lower interest rates. In the third and fourth quarters of 2019, long-term interest rates hit and stayed near historical lows, and the consensus view continues to be “lower for longer.” This will place increasing pressure on carriers in 2020 and over time.
In the months since most carriers filed and priced their products for the 2017 CSO changes, prevailing long-term yields have dropped about 100 basis points. Carriers are already adjusting their expectations for the “lower for longer” world, but ultimately, consumers will have to adjust their expectations as well for new policies.
Lower interest rates definitely have the potential to reduce the appeal of fixed guaranteed products (due to higher prices over time); however, people will always value “certainty over uncertainty.” One of our key value propositions is to provide that certainty, through strong guarantees and the option to purchase lifetime benefits, and so we continue to see a strong future for our products and the financial professionals we work with.
Peace of mind for a lifetime
Retirees continue to say that outliving their assets is their number one concern, compounded by their number two concern of a major health/LTC event. We’re committed to continue offering lifetime benefits, as well as joint protection with one policy, because we understand the peace of mind these benefit options bring.
With the continued incidence of chronic, degenerative diseases, such as Alzheimer’s disease, individuals can potentially require years of care, often progressing from at-home care to full-time care in a facility. Often, when clients talk about LTC expense protection (if they’re talking about it at all), they want to know about averages–average length of LTC expense need, average cost of care, etc. As financial professionals, we know it’s important to keep in mind that people are not statistics and nobody is average. In fact, planning for an “average” LTC event will mean that clients and their loved ones will remain exposed to the financial consequences of a catastrophic LTC event–one that could last far longer than average, depleting assets they’ve worked hard to build.
As a financial professional, planning for averages would mean that about half of your clients will end up with less coverage than needed. We can’t predict who will be affected by significant LTC expenses and who won’t, but lifetime benefits can protect against the possibilities. And with ABLTC, a death benefit passes on to heirs if LTC benefits aren’t exhausted.
What to expect this year
From my perspective, I expect 2020 to be one of the most interesting years of my 29-year career. With a “lower for longer” outlook being adopted more broadly, companies will have to navigate some challenging conditions. As in 2019, the pressure is on to continue to improve customer experiences and tell the stories of how LTC protection makes a real difference–not just to the numbers on a balance sheet, but also to people and their loved ones.
Market demographics continue to portend strong growth potential for ABLTC. We’ll continue our commitment to this market with an eye to the long term, focusing on delivering stable, predictable, guaranteed solutions that stand the test of time, and providing your clients peace of mind for a lifetime.
Thank you once again for your part in our success and we look forward to writing more of the story together in 2020. [DM]
OneAmerica® is the marketing name for the companies of OneAmerica. Products issued and underwritten by The State Life Insurance Company® (State Life), Indianapolis, IN, a OneAmerica company that offers the Care Solutions product suite. Not available in all states or may vary by state. All guarantees are subject to the claims-paying ability of State Life.