As public attention continues to focus on the provisions of the CLASS legislation (see related article from last week’s IN&V), according to a study released this week by the American Association for Long Term Care Insurance (AALTCI), comparable LTCi coverage can vary in price by more than 40%. For example, the study points out that a 55-year-old couple purchasing long-term care insurance protection can expect to pay $2,350 per year (combined) for about $338,000 of current benefits ($169,000 each), which will grow to about $800,000 of combined coverage for the couple when they reach 80 years old. The study analyzed rates for 11 LTCi insurance policies.
“We significantly expanded this year’s survey to include more relevant scenarios for both couples and individuals at varying ages, health conditions and to take into account the significant spread in costs among insurers for virtually identical coverage,” explains Jesse Slome, executive director of the long-term care insurance industry trade organization. The study found that rates for comparable coverage from leading insurers could vary by between 41% and 48%.
Also of interest, the study indicates that three-fourths (78%) of long-term care insurance policies are purchased by couples where either both or just one spouse purchases coverage, with the average age for individual purchasers of 57. Slome explains that some 76.3% of purchases are made between ages 45 and 64, according to the association’s research. While there is variation in pricing, independent agents should also realize that there are different underwriting appetites that LTCi carriers have depending on the health status of the applicants.
“Insurance company medical directors and their underwriters can have different philosophies with regard to medications taken and the applicant’s health conditions, and that’s why it’s important to know which carrier is the right one to work with for a specific situation—or partner with someone that does,” says Dick Langhough, senior vice president of Crump Life Services, an MGA that specializes in working with P&C agencies for life insurance and LTCi.
Another factor that independent agents should realize is that while rates do vary, they are not guaranteed. It’s important to also look at the financial condition and experience of the carrier providing the LTCi quote. Since LTCi is a “long-tailed” product, it may be several decades; agents should look to the past stability of rate activity as well as their reputation for paying claims. In 2011, MetLife, John Hancock and the Guardian, all large writers of LTCi, stopped writing new business. Yet, since the CLASS program will not have any medical underwriting, it will be subject to adverse selection, which may result in higher premiums and/lower benefits for people in reasonable health; people thus may fare better through a private insurance LTCi insurer. Agents should be considering LTCi as an opportunity for their agency to cross-sell their personal lines and commercial lines customers. No doubt there will be more in the press regarding CLASS, and independent agents are well positioned to offer alternatives to their customers.
Dave Evans (dave.evans@iiaba.net) is a certified financial planner and an IA l-h contributing editor.