Long-Term Care Insurers off to Fast Start in 2013

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Compared to 2012, leading long-term care insurance companies recorded increases of 30%-55% in applications submitted during the first two months of the year.

According to the findings of a study released this week by the American Association for Long-Term Care Insurance, January and February were busy months for insurers. The organization based their report on data representing nearly 30,000 individual long-term care insurance policies submitted during the first two months of the year.

Roughly, a dozen significant insurers currently offer traditional long-term care insurance coverage to individuals including both stock and mutual companies. The Association reported that January/February policy submission for several insurers increased between 45%-55%. Several companies reported declines compared to the prior year, attributed to changes in available policy provisions as well as rate increases.

The growth is a welcome and positive sign for an industry that has faced the need to increase premium costs for both new and existing policyholders. Costs for new long term care insurance policies have increased between 30% and 50% compared to several years ago, and price increases of between 10% and 80% percent have been sought for existing policies. Higher costs are generally assumed to negatively impact new policy sales.

Several leading insurers, including Genworth Financial and John Hancock, plan to begin rolling out new policies that will charge higher rates to single women compared to single men. 10%-15% of applicants are single women, and the increase is expected to amount to between 20%-40%. Long-term care insurance specialists report significant consumer interest in locking in current pricing prior to the policy roll-outs that are expected to begin this April.

Genworth is the slightly larger insurer in terms of lives covered and is credited with making the bold move in terms of repricing coverage for single women.  Executives at other insurers noted their companies had looked at this for some time but decided not to reprice as a result of concerns such a move would impact sales.  As a result of its size and diverse distribution, the Genworth change should have little negative affect on overall sales.  Other insurers will undoubtedly enjoy a short-term bump in sales but their willingness to accept a higher percentage of single women at lower prices will force them to adopt a similar strategy of sex-distinct pricing.

With roughly one million covered lives John Hancock adopted an approach to the market that appears to finally be taking hold.   Lower interest rates impacting investment earnings have necessitated significant premium increases particularly on the inflation growth option designed to increase policy benefits over time.  Hancock introduced a participatory formula whereby policyholders could share in higher-than-expected returns.  In an industry slow to accept change, the new concept met with initial resistance but, in analyzing sales results, seems to be gaining favor as agents recognize the importance of affordability to consumers.

Roughly, a dozen significant insurers currently offer traditional long-term care insurance coverage to individuals including both stock and mutual companies. The Association reported that January/February policy submission for several insurers increased between 45%-55%. Several companies reported declines compared to the prior year, attributed to changes in available policy provisions as well as rate increases.

According to the 2013 Long-Term Care Insurance Price Index, also recently released by AALTCI, the average cost for a 60-year old couple, each purchasing $162,000 of benefits, is $1,816 per-year. The addition of a 3% annual growth option increases the cost of coverage to $3,725 annually.  The organization noted, however, a significant range in costs of between 40%-90% between the lowest-priced and highest-priced policy with comparable benefit provisions.

Leading insurers currently offering individual long-term care insurance coverage include Genworth Financial (NYSE: GNW), John Hancock, a unit of Manulife Financial Corporation (NYSE: MFC), New York Life and Transamerica a wholly owned subsidiary of Aegon NV (NYSE: AEG). Companies that offered coverage but withdrew from the market in recent years include Met Life (NYSE: MET) , Prudential (NYSE: PRU) and Unum Group (NYSE: UNM).   Prudential recently announced it would cease accepting new applicants into existing group or employer-sponsored cases.  Unum had previously exited from this market where it was once a significant player, leaving Genworth as the only insurer currently offering true group long term care insurance policies to the larger employer marketplace.


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