Long-term care insurance is one of the biggest topics of conversation among retirees and estate planners. The industry is going through a period of turmoil with many policyholders now cashing in on their long-term care needs and few new buyers signing up for long-term care insurance. As a result, companies that carry long-term care insurance are shifting the way that they approach these types of policies, and consumers should be looking for new trends in long-term care insurance.
Long-Term Care Insurance
There is good reason for shifting trends in the long-term care insurance industry. Sales for individual policies have plummeted over 75% in the last ten years, and only ten percent of long-term care insurance carriers are still in business. Those that remain continue to increase the premiums and tightly underwrite all of their policies. At this point, most long-term care insurance plans are only available for the wealthy and are unaffordable to the lower and middle class.
Trends in Long-Term Care Insurance
In order to make long-term care policies affordable and available to more consumers, the long-term care industry is looking to make some changes in their business model. These are some of the shifts that you can expect to see in the long-term care insurance industry during the coming years:
New premium structure
The previous premium structure on long-term care insurance was to keep premiums low and steady for years. However, high claims and a lack of returns have forced long-term care insurers to hike up the premium rates every few years. Some of the largest long-term care insurers are looking to create a new premium structure that would raise the premiums by a small amount every year, just like other types of insurance policies.
Cheaper policies with less coverage
More carriers are now selling long-term care policies with shorter terms and smaller benefits. However, these policies are also cheaper than previous long-term policies and are meant to attract new consumers to the market.
Simpler products sold online
The successes of online marketplaces like ebay.com, Healthcare.gov, and others have made long-term insurers think about offering products through a similar forum. It would require the policies to be simplified but would also allow the consumer to compare policies from different insurers. It would also require large regulatory changes but also cut down on consumer costs.
No rebound with group stand-alone insurance
Group long-term care policies are no longer as popular as they once were. As a result, fewer insurers are offering it as an option to new consumers, and do not be surprised if many long-term care insurers stop offering this option for coverage altogether.
Some insurers are offering hybrid products like long-term care insurance combined with an annuity. This type of product spreads the risk for both the consumer and the insurer. While some firms have already made it an integral part of their retirement package, other companies are less excited about multi-risk products.
Combining health and long-term care insurance
While this option seems to be the furthest away from happening, there is a lot of talk amongst long-term care and life insurance carriers about creating a combination product. If it does occur, life insurance companies will most likely be the insurers carrying the policy, but figuring out the payment structure seems to be the biggest impediment to this option.
Public/private insurance partnerships
Many long-term care insurance companies are urging the government to get involved in the long-term care industry. One of the more popular options is for the government to cover catastrophic benefits while the private insurers cover the other long-term care expenses. The major issue to this option is figuring out where the funding for the government coverage would come from.