Long-term care insurance (LTCI) used to be vibrantly promoted as the must-have insurance for aging Baby Boomers.
But the luster of the LTCI rose has faded substantially—to the point that the 15 companies who once generated the most statutory earned premiums have now either exited or substantially limited that part of their business.
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The LTCI market is consolidating and in force policies are beginning to pay out benefits. Genworth remains one of the dominant players in the LTCI space but even its position is shaky since the Moody’s ratings agency anticipates that appetite for LTCI products is dissipating rapidly.
Fewer companies offering LTCI insurance products means an even harder hit for the LTCI industry. Turns out that LTCI insurors did not anticipate the longevity of many of their policy holders so they are ill prepared to make the benefit payouts over a significantly longer period of time.
Low interest rates have also hurt the LTCI business. Demand for the insurance is increasing, however, since people 65 and older face a 68% chance that they will either become at least partially disabled or will experience cognitive difficulties at some point in their lives.
Although companies are trying to raise premiums to manage these higher risks, state regulators take a dim view of raising insurance premiums
on older people. Some are creating hybrid products, incorporating life insurance into the LTCI mix.
This doesn’t do anything about the current product in force and the prolonged number of years these policies will have to pay out benefits. These products will continue to be a drag on the LTCI industry.
And the issue of how to care for the growing population of older, more infirm individuals will only grow more complex.