|Title:||United States annual long-term-care insurance buyers and new premium in units and dollars for 2004 to 2010|
Start of full article - but without data
Individual LTCI Sales Trends
Both new annualized premium and the number of buyers had been
trending down before increasing in 2010. The statistics do not include
sales of combination/hybrid products.
Buyer (thousands) New premium (millions)
2004 XXX $XXX 2005 XXX $XXX 2006 XXX $XXX 2007 XXX $XXX 2008 XXX $XXX 2009 XXX $XXX 2010 XXX $XXX
Note: Table made from bar graph.
Prospects for sales of long-term care insurance are on the upswing in the United States after a difficult few years during which several insurers stopped writing new policies and many others raised premiums to account for rising costs in existing contracts and for low investment returns.
According to marketing and research association Limra, premiums for individual LTCI products in 2010 rose for the first time since 2007 and only the second time since 2004. And Jesse Slome, executive director of the American Association for Long-Term Care Insurance, said in January that while final numbers for 2011 were not yet available, sales for the year are likely up. He predicted that a half-million Americans purchased some form of the insurance last year. Limra reported that new individual premium in 2010 among surveyed companies was $XXX million, up XX.X% from 2009.
The improvement in sales comes despite a shake-out in the industry in which some major writers exited.
In November 2009, Allianz Life decided to stop selling stand-alone LTC products. MetLife dropped out in November 2010, and Berkshire Life, the stock-company subsidiary of Guardian Life, halted sales in February 2011.
Genworth Financial, which has been in the individual LTCI business since 1974, recorded sales of $XXX million through the first three quarters of last year, up XX% from the same period in 2010. Colleen Benzin, senior vice product of LTC distribution, said the spurt was in part a rebound from the challenging economic environment of the past few years.
"The sales declines we saw were the result of financial advisers just trying to retain their clients," she said. "They were very focused on other things, and consumers were concerned about their discretionary income."
But there were also lessons learned. "Financial professionals and advisers are much more aware today of the need to protect against these types of issues," Benzin said. "They work so hard to grow clients' assets and their assets under management, and we've all experienced firsthand how quickly those assets can go away. So the professionals have really had their eyes opened to how valuable LTC insurance is, not only for their clients, but for them and their income streams."
Also driving the change is the trend toward caregiving, Benzin said. "All of us now are starting to experience long-term care with our parents," she said. "And as XX million baby boomers go through that experience and start talking about it, that's certainly got to be driving the growth, not only for Genworth but the industry."
Help From Wholesalers
Genworth is also benefiting from the help its wholesalers provide to its distribution partners, Benzin said. "Our belief is that LTC planning is just a natural extension of the overall financial or retirement planning process," she said.
Wholesalers train and support distributors in the company's brokerage general agency channel. Genworth also has an extensive wholesaling network that focuses on the large financial institutions, including banks and wirehouses, by helping professionals with client presentations, Benzin said.
In particular, wholesalers help a financial representative determine the right profile of an LTCI client and how to mine a book of business. A third distribution channel, the company's career sales force, sells directly to AARP members and consumers at the retail level.
"And the other really valuable thing we've brought to the table is a marketing platform called 'Let's Talk,' where we provide financial professionals the tools to help them have conversations with clients," said Benzin. "It's not the easiest conversation to have, either between an adviser and client or between a husband and wife. But we've put together the tools and some helpful tips to help those conversations take place. If you don't have the conversation, you're never going to get to the solution."
Once a prospect agrees to apply, Genworth offers a process called Long-Term Care Quick Requests. "Sometimes the financial professional doesn't want to have the health conversation, and this is a helpful way to be able to hand that off and let the insurance carrier do it for them," she said. The company takes the application information from the prospect over the phone and can even e-sign all of the forms and send the application into underwriting, Benzin said.
In a written commentary last year, Limra's Corporate Vice President of Product Research Elaine Tumicki said that with fewer than five million policies in force, only about X% of Americans over XX currently owns individual stand-alone coverage, and more than two million people have group coverage.
Despite the sales gains in 2010, Limra is finding some evidence of a loss of industry sales momentum, according to Public Relations Director Donna Wagner. She said that through the third quarter, growth in annualizcd new premium slowed to X% at $XXX million. About XXX,XXX Americans purchased individual LTCI in the first nine months from carriers participating in Limra's survey, X% fewer buyers than in the same period of 2010.
In the third quarter, there was a X% decline in lives covered and X% less premium. They marked the first quarterly decline since the end of 2009. Sullivan said the individual LTCI industry is beginning to see the impact of carrier exits.
The Real Market Size
While the implication is that the pool of prospects for LTCI is huge, Slome said that is not the case. "People believe that because all aging Americans need to address LTC planning, that all Americans are valuable prospects," he said. "That's just not true.... Every product has a distinct and defined market, and the market for LTCI is about XX million people. That's it."
The reason, Slome said, is that most buyers are in their mid-XXs to mid-XXs. They must be healthy enough to qualify and must have the financial wherewithal to afford LTC insurance. They must also be interested in planning for their futures, he said.
He also said that people who have not been personally touched by an LTC experience are less likely to be good prospects.
Slome said he and others from the association "sliced and diced" data based on population and a range of studies to come up with a conservative figure of XX million to XX million prospects. "The insurers understand this," he said. "The problem is that the industry has suffered for many years by creating expectations that could never be achieved. To a large degree, the LTC insurance industry is Amway. You get people excited and motivated to sell, and you hope out of hundreds of people you generate one or two committed superstars. That's what's kept the industry alive.
"Amway is not a broken model, by the way. Amway is very successful, and so is LTCI." Slome pointed out that the federal government's Affordable Care Act's LTC initiative, the CLASS Act, died but the industry survived despite the dire economic conditions of the past few years. "This is a really tough time, but it's been an unbelievably good year for this industry," he said.
Policyholders seem to value their insurance. Slome said that when XXX,XXX participants in the federal LTC insurance program faced XX% rate increases, only X.X% or X.X% let their policies lapse. About XX% paid the higher premium, perhaps because their health had worsened or they had priced their policy against a new one. Others took action to lower the premium by reducing their inflation-protection increases or their overall benefits.
"Nobody likes to charge more for anything; it makes great headlines and negative news," Slome said. "But the fact is, it doesn't scare off the consumers who own the coverage."
Some sellers of individual coverage don't sell stand-alone products at all. Instead, they offer so-called combination products--mostly permanent life insurance policies with a LTC rider. The LTC coverage in these products comes in the form of accelerated payments from the death benefits. Some also pay an extension of LTC benefits beyond the death benefit.
Focus on Combos
Kevin Kimbrough, principal in national sales for Saybrus Partners, manages Saybrus' sales training, advanced planning teams, business-development functions and external sales force.
He said that XX% of life insurance policies Saybrus sold last year had an LTC rider. "In some of our businesses, we write stand-alone LTCI, but we are really more linked to what we do with life insurance day-to-day," he said. Saybrus partners with financial institutions and financial advisers to help them make life insurance a consistent part of their practices.
Buyers of this protection are most commonly in their XXs or XXs. The typical client for a Saybrus distribution partner is past XX X/X years old, is taking required minimum distributions from qualified accounts and has told the adviser to make the minimum withdrawal and invest it elsewhere, Kimbrough said.
"That tells the adviser that the client doesn't need the money to live on, causing the IRA to be a dormant asset," he said. "If he wants the money to go to his kids or grandkids, with the caveat that he wants to protect the money from potential long-term care costs, we can recommend a repositioning of assets." For example, $XXX,XXX in an IRA might net heirs $XX,XXX after they pay taxes, depending on their tax bracket. So instead, the adviser will suggest that the owner move the money out of the IRA, perhaps over a XX-year period, pay the taxes, and buy a life insurance policy with a death benefit of perhaps $XXX,XXX or so income-tax free with the additional benefit of a LTC rider, he said.
Most of these clients have about $XXX,XXX to $X.X million of net worth, and Kimbrough said he is amazed how their advisers work so hard on selecting what investments they are going to use and how they are going to mitigate investment risk. But they are often blind to the largest risk to their assets--the potential LTC event that could wipe out someone's entire net worth.
Stand-alone LTC policies are not more popular among distribution partners because clients perceive them as an added expense in retirement as opposed to an asset transfer, even when expense is low relative to the risk, Kimbrough said.
* The Trend: Individual long-term care insurance premiums have grown since 2009, but may recede somewhat as a result of carrier exits.
* Behind the Trend: Many remaining LTCI writers have raised in-force prices and help their distributors incorporate the coverage into overall retirement planning.
* What It Means: Absent another economic downturn, the industry could embark on a period of organic growth.