Long Term Care Insurance
Cost Statistics
Neither long term care insurance cost statistics nor sales have been very promising lately. Long term care insurance (LTCI) is somewhat of a new market brought about by changes in our economy and health care system. Insurers had high expectations when first offering the new polices but consumers just weren’t biting. Now consumers are beginning to realize the necessity of LTCI coverage while insurers are trying to balance claims and costs.
Foresight Necessitates Long
Term Care Insurance
Due to the changes in retirement age, Social Security benefits, and Medicare insurance, health care and insurance companies noticed a need to provide an entire generation with funding for health care in later life. They realized the baby boomers would be coming of retirement age with out the long term care security they needed. Why? Among other reasons the change from traditional pensions to deferred compensation plans in the form of 401Ks has left a lot of people short on retirement funds.
Long term care insurance was introduced as the solution to health related needs for those who didn’t plan on having the finances to cover those expenses. For some reason the baby boomers just didn’t get it. They had life insurance, pensions, dividends, Medicare, children…what more could they need? Besides they weren’t ready to retire. Isn’t it just like human nature not to acknowledge and appreciate a kindness?
Dilemma
Insurance companies set rates and waited for the influx. It never came. However, claims from the few insufficiently supported polices began to arrive. If everyone had jumped on the bandwagon while they were still young and locked themselves into a sure rate, or if rates had been higher from the start, the funds for these policies would have been sufficient. Well, businesses cannot just sit around and wait for clients to catch up. They couldn’t keep losing profits to LTCI policies. The only thing to do was raise rates across the board.
The Plot Thickens
Policy holders saw their assumed fixed rates increase 50%. Just a little unread fine print made this legal. The policies promised that rates could not increase due to age or health, but it didn’t say rates wouldn’t increase due to unexpected claim to payments imbalance. However, everyone knows that’s how insurance works. No different than car rates, right? And LTCI is still a much needed commodity.
LTCI Marketing And The
Affect On LTC Costs
Somehow financial advisors, the biggest sellers, came to the realization that they should be promoting this new fangled product a little more aggressively. Or just maybe their clients started heeding their advice. Or it could be that the recent plummeting of 401Ks backed by mutual funds really scared those savers into action. Anyway LTCI sales have increased and the market is making a comeback – and just in time.
Now that insurers are a little more familiar with the product, sales and claims should balance out a little better. People who had the rug snatched out from under them warned their colleagues to read their contracts diligently. You know it’s funny how a person doesn’t mind paying for something if he feels he doesn’t have a choice in the matter.
Long Term Care
Sales Statistics
For the past 4 years LTCI sales have been on the decline. Insurers began to doubt their intuition. However, individual financial advisors are seeing double digit increases in sales. The insurance companies are glad of it and counting on the advisors to pull them out of the slump. The federal government is expecting a large portion of the 75 million+ baby boomers to reach the age of 65 soon; and they will be looking for something to rely on for their long term care payments. As promising as these statistics may be to the need of long term care and its insurance, only 7 million Americans hold LTCI policies. Insurer enthusiasm has been hard to come by. From their position they can only see growth.
Wrong Focus
Long term care insurance is a very complex product. Insurers were focused on generating sales instead of fostering trust and lifelong relationships. Odd since they were offering a lifelong product. Financial advisors have helped insurers see the need for customer support and education. The high cost and complexity of the product makes buyers leery of making a purchase. During the slump many companies hiked up prices then withdrew coverage -- not something which fosters trust.
The statistics of rate hikes, withdrawals, and slumps will predictably continue to produce wary buyers. Hopefully insurers will implement educational strategies. Strategies to educate both their agents and potential clients are needed. Right now they are using technology to try and clarify policies and prices.
Another marketing boost is education through comparison of paid long term care to Medicaid funded care. Not many people are willing to relinquish assets and control of their life. Others can easily liquidate assets if long term care becomes necessary for either partner. However, few would choose to do so. The trend seems to be leaning toward informed LTCI purchases from the 5 leading companies who have remained dependable and unchanged through out the whole learning process.
Macroeconomics 101
It appears the laws of balance set forth in macroeconomics are about to set things right. Consumers hold onto money. Businesses compensate for the lack of money by increasing prices. The market comes to a standstill. Consumers’ money stores have grown, the market stabilizes and restores their confidence, they start purchasing and…this is the part I like best…prices drop again.
Statistics are good. They give us a general idea of what is going on in the world around us. However, when things move closer to home it is easier to sense what has or has not created these statistics, giving us a realistic picture by which we can make clearer decisions. Long term care insurance statistics and sales may be at odds a little longer, but it appears insurers have learned a valuable marketing lesson.
Compare Long Term
Care Insurance Costs
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