An Unviable Value Proposition
In a way, all this is understandable. Carriers want clients who are less likely to make claims. But demand is highest among those who are most likely to make claims. "The consumers who are most interested in the coverage are those who see long-term care in their future, and perhaps imminently," observed Len Hayduchok, CEO and president of Dedicated Financial Services in Rehoboth Beach, Del., and Hamilton, N.J.
This disconnect between supply and demand could put the industry at risk. "LTC insurance is becoming an almost unviable value proposition in the market," said Hayduchok.
Consequently, more people than ever are turning to hybrid plans that link LTC coverage to life insurance or an annuity. These products have always had less stringent underwriting requirements to qualify. They also have more predictable premiums (most are paid upfront) and resolve the "use it or lose it" problem—i.e., clients will receive benefits one way or the other, either through a LTC claim or as a death benefit, or both.
"Hybrid policies will become more of the norm," said Beck, the insurance agent.
Existing Policies Performed Well
In any case, long-standing LTC insurance customers had few complaints during the pandemic.
"Our clients largely did not experience issues with coverage or benefits," said F. Michael Zovistoski, a certified financial planner and managing director at UHY Advisors NY in Albany, N.Y. If anything, he said, the carriers themselves may have suffered a little as many of their members were unable to pay premiums on time. "There were also some minor delays in back-office services as insurance company employees settled into working at home."
But because most LTC policies have a 90-day or longer elimination period, during which policyholders must wait before benefits kick in, Covid scarcely figured into new claims. "For the vast majority of our clients—and I presume the population as a whole—LTC insurance never really had the opportunity to perform or disappoint," said Beck.
Lasting Effects Unknown
The lasting effects of the pandemic on LTC insurance remain to be seen.
"Over the shorter term, it is likely that companies will continue to take a cautious approach to underwriting and product design, which could make it more difficult for some people to obtain the type and amount of coverage they desire," said Kimberly Foss of Empyrion Wealth Management in Roseville, Calif.
The long-term implications, though, are less clear. "Until the long-term mortality and health effects of Covid are more well understood, and until more actuarial data is available, companies will be unable to comprehensively analyze the financial impact on the industry," she said.