Is It Morbid? No, It’s Mortal.

My dad is 100 years old. He has two long-term care insurance policies. Yes. We’ve dealt with rate increases on both. We’ve reduced coverage from lifetime to four years. And are about to reduce coverage again due to another rate increase and his life expectancy. He’s well beyond his life expectancy and still going strong! Good for him and for me. He lives in TX. I live in AZ. We talk every night.

COVID has had a positive impact on LTCI insurers

Morbid? No. It’s mortal. Yes. A grim statistic. But the fact is that the mortality rate related to the pandemic helped long-term care insurance issuers. How? More deaths resulted in fewer claims.

Lower interest rates over the years have hurt long-term care insurance investment earnings. Thanks to COVID, insurers reported $241 million in net operating gains from LTCI in 2020. This is up from a net operating loss of $2.3 billion in 2019, according to analysts at Fitch Ratings.

Further, Fitch predicts COVID could continue to help insurers in 2021 but if mortality and morbidity normalize and interest rates remain low, the future impact is uncertain. They expect regulators to continue to approve actuarially substantiated premium rate increases to offset losses on old legacy policies.

Who is buying LTCI today?

We read a lot of surveys about who and what. Always have. Over our 20 years of exclusive focus on long-term care expense planning we’ve seen trends swing from standalone policies to hybrids and now slowly back to standalone. 

Premiums are the driving force. Standalone policies that are pay as you go and the insurer carries all the risk are growing in appeal once again. Why? These policies are highly customizable and do not require a substantial single premium. They are more affordable for more consumers.

We consult on standalone and hybrid funding solutions. What we know is that consumers don’t have a thorough understanding of how hybrid products work and that they share the risk with the insurer if care is needed.

In our experience, consumers are the drivers of this insurance. Almost all have had a personal experience with long-term care. And as a result, they are smarter about risk, cost, funding options, products, tax advantages, etc. Most have provided hands-on care or funded long-term care for a parent. Oftentimes two. Sometimes four. They want a different experience for themselves and their children.

Morbid or mortal? Mortality is certain. Morbidity far less so. Planning for long-term care expense remains complex. The risk is high. The cost is expensive. Do you have a plan?