The Recession's Impact
But there are other explanations for the industry's woes. Jesse Slome, executive director of the American Association for Long-Term Care Insurance, a trade organization in Westlake Village, Calif., says the biggest pressure on these companies actually comes from poor investment returns over the past few years.

"Forty percent to 60% of what an insurance company ultimately needs to pay future claims comes from investment returns," he insists. "For every one percentage point drop in long-term interest rates, an insurer needs a 10% to 15% premium increase to stay profitable."

Slome estimates some 8 million Americans currently own LTC insurance. The industry's target population-those between 55 and 65 years old who are in good health and have sufficient funds-comprises roughly 15 million. "Over the next five years, I expect we'll see greater penetration and significant growth," he says. "Reports of the industry's death are an exaggeration."

The departure of MetLife after two decades in the LTC insurance business is a shock, Slome concedes, but "not a seismic shift. ... Other companies are clearly active, engaged, committed to this marketplace and picking up the slack."

Indeed, MetLife's LTC sales last year amounted to $36 million-small compared with Hancock's $116 million and Genworth's $108 million, as measured by Broker World, an industry publication.

Beyond Dollars And Cents
Even if there is plenty of business to keep the industry going, there may still be a festering cancer within. "LTC providers never built their products correctly," holds Chris Cooper, a financial planner and president of Chris Cooper & Co. and ElderCare Advocates, in Toledo, Ohio, and San Diego.

The problem, he says, comes down to understanding the true risks involved in long-term care. "If you have Alzheimer's, it's not going to get better tomorrow," he points out. "The common maladies of aging can go on and on for decades, and only get worse."

What's more, there can be endless ancillary costs such as transportation to and from medical facilities, new wardrobes as people shed weight or become unable to control their bathroom functions, and a wide variety of medical equipment and medications. "This is the youngest form of insurance in the U.S., and we just don't have enough claims experience to understand what's needed," says Cooper. "The companies simply don't have adequate empirical data."

So what are financial advisors to do to help clients plan ahead? "They need to realize that an insurance policy is not the entire solution," stresses Cooper. "You still have to save and invest, and draw up a will, trust documents, powers of attorney, health-care directives and other items that are outside the financial advisor's purview."

Careful planning, in other words, requires input from attorneys and other experts-"a multidisciplinary tag-team approach," says Cooper.