Another Shock to the Long-Term Care Insurance Industry

A company that was once the largest seller of long-term care insurance policies, Genworth, has announced that it will now only be selling its policies through direct-to-consumer channels or through employers or affinity groups. This market is a small one currently, but brokers fear that move could spur a wider industry trend as it decreases distribution costs.

The long-term care insurance is already swimming in stormy seas, as sales of traditional policies have declined by more than 90% over the past decade. Less than a dozen carriers still sell the policies. Generally, it is more common for consumers to buy combo or hybrid policies that link long-term care coverage with annuities or life insurance. Approximately 350,000 policies were purchased last year according to the American Association for Long-Term Care Insurance, but fewer than 60,000 were stand-alone policies. Combo policies can be seen as a more efficient purchase for consumers because they may use a portion of their death benefit of life insurance policies to pay for long-term care needs. Anything left over would go to their beneficiary.

Dementia and other neurological conditions have increased uncertainty risks within the industry. About half of all long-term care insurance claims come from policyholders with Alzheimer’s and other dementias. Last year, Congress and the Trump Administration allowed plans to offer non-medical supplemental benefits such as personal care aides or home modifications through the new Medicare Advantage benefits and services.

See Howard Gleckman, Another Shock to the Long-Term Care Insurance Industry, Forbes, April 1, 2019.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.