What’s often lost in news of rate increases and announcements of carriers entering and exiting the market is the fact that Long-Term Care insurance [LTCi] claims continue to grow – both in amount paid and number of claimants. With prospective consumers and current policyholders potentially wary of the industry due to this one-sided media coverage, it is important to adequately inform people of the proven track records carriers have when it comes to meeting their commitments to insureds come claim time.
Recent claims data shows that carriers are indeed making good on their promises. From 2000 to 2014, industry-wide claims payments more than quadrupled, growing from $1.87 billion annually to $8.73 billion1. This growth has not stopped either, with recent estimates for annual claims approaching $10 billion2. The trend holds true with the number of claimants as well, which grew over 5% to nearly 300,000 individuals in the one-year period from 2016 to 2017 alone3. Given this continued growth in amount paid and claimants served, it is no wonder that the share of private insurance financing (i.e. LTCi) covering the costs of long-term care is growing faster than all other sources of long-term care financing4.
Furthermore, despite the increased volume, it remains incredibly rare that policyholders are denied claims. Estimates for industry-wide denial rates are approximately 4%, with most denials resulting not from a matter of the carrier’s direction, but from policyholders’ misunderstanding of what is and what is not covered in their policies5. What’s more – eight in 10 claimants found filing a claim to be an easy process6. The importance of these two findings cannot be overstated. For many individuals, the process of transitioning into a nursing home or other facility or having someone come to their home for home care can be a time filled with stress and complication. It is reassuring to know that the process of filing a claim is comparatively hassle-free.
There are certain trends with respect to group claims that are worth noting as well. As with individual claims, group claims also continue to rise. What’s particularly interesting, but not surprising, though, is that the average group claim is smaller than the average individual claim2. The implications of this are intriguing for carriers currently in or considering entering the Worksite market. Leaving underwriting out of the equation, with their lower daily benefits and shorter benefit periods2, perhaps Worksite plans can lay a path for greater sustainability down the road.
A recent case example was the impetus for this article and serves to nicely summarize this trend. Mutual of Omaha recently updated a consumer-facing piece which details its claims experience, linked here. As of the last iteration of this piece, which cites statistics from 2015, Mutual of Omaha reported paying out $90 million in claims annually with over $889 million total paid out since 19877. Just two years later, the updated piece reports an increase of 20% in annual claims payments with a 24% increase in total claims paid8.
Mutual of Omaha’s piece is aptly titled, “Promises Kept.” Consumers interested in purchasing LTCi want to be confident in the fact that the carrier they choose will be able to fulfill its commitment come claim time. Also, with approximately $2 trillion in potential benefit value in in-force LTCi policies4, current policyholders need to know carriers are adequately prepared to meet their obligations as well. So long as this trend continues – on both a carrier and industry-wide level – clients and shoppers alike can rest assured.
- “75 Must-Know Statistics About Long-Term Care”, Morningstar, 2017
- “2017 Milliman LTCi Survey”, Broker World, 2017
- “Long-Term Care Insurance Claims Paid – 2015 thru 2017,” American Association for Long-Term Care Insurance, 2018
- “The State of Long-Term Care Insurance: The Market, Challenges and Future Innovations”, NAIC & The Center for Insurance Policy and Research, 2014
- “The Benefits of Long-Term Care Insurance and What They Mean for Long-Term Care Financing”, LifePlans, Inc., 2014
- “Experience and Satisfaction Levels of Long-Term Care Insurance Customers: A Study of Long-Term Care Insurance Claimants”, LifePlans, Inc., 2016
- “Promises Kept”, Mutual of Omaha, 2016
- “Promises Kept”, Mutual of Omaha, 2018