Long-term care insurance seems to be attracting an ever-younger clientele. The average age of clients has dropped for most companies. Insurers expect this trend, coupled with the baby-boomer generation reaching retirement, will help improve this product’s “sluggish” sales.
Clearly, long-term care insurance (LTC) is no longer just for senior citizens, insurers reveal. “A few years ago, the average age of people who bought LTC insurance was age 67. It has now dropped to 59,” says Karyn Kasperski, product manager, living benefits at RBC Insurance.
The ageing population is one growth engine for LTC. Ms. Kasperski explains that because many people, mostly women, are taking care of loved ones with reduced autonomy, they are becoming more attuned to the importance of this product. “Women are naturally more inclined to take care of their loved ones. They know perfectly well what this responsibility entails.”
Sylvie Coulombe, general manager, marketing of the Clarica product at Sun Life Financial, agreed that the average age of the LTC insurance client is decreasing. “In 2000, when we launched long-term care insurance, customers were in their mid-60s. Today, the average is just 57.”
Still, not everyone is convinced that the purchase age for LTC is dropping. David Baird, president of the full-service managing general agency (MGA) Ten-Star Financial Services, explains that most of the business is still being written between the ages of 62 and 68.
Brian Veinot, chief operating officer for the long-term care division of the MGA, Ten Star Long Term Care Insurance Brokers, agrees. He says that the younger market is one the company would like to tap into with the launch of its own LTC product in September.
Mr. Veinot realizes that LTC is still perceived as a senior citizen’s product. “A lot of people still think that LTC is senior insurance and they don’t understand that if you buy it young, it’s cheaper,” he explains.
Sales growth expected
The declining age of first-time long-term care insurance purchases should spur sales growth in the short term. The upsurge will be phenomenal, predicts Richard Elias, marketing director, living benefits for Eastern Canada at Manulife Financial “People born in 1946, at the start of the baby-boomer era, will be 60 in two years.”
He also singled out a second factor: “The critical illness insurance premiums will soar by 20% in the next few months. This will magnify LTC’s potential because the cost of the premium does not vary for the first five years.”
For now, however, Canadian sales are fairly stagnant. American research firm LIMRA International even noted a decline in sales from 2002 to 2003.
“Its sales are not the strongest. We have to make the product better known to the public and to advisors,” said Catherine Montminy, coordinator, life and health individual insurance at La Capitale, a life company from Quebec City.
The company also noted that captive agents sold more LTC in 2003 than independent advisors.
Insurers agree that the public and advisors still need to be educated… a lot. “The need is there. We’re fine-tuning our product to make it less complex than it is today,” said Carl Jorgensen, director of living benefits at Manulife.
Some insurers are using recent acquisitions as a springboard for their LTC products. “With the buyout of UnumProvident and its distribution network, we can now reach a larger population pool,” said Neil Skelding, president and CEO of life insurance at RBC Insurance. “We’ve trained our representatives to demonstrate the need for this product.”
No level rates… for now
Some believe that LTC sales will be powered mainly by products with guaranteed premiums, but the industry does not seem ready to take the leap.
None of the insurers interviewed plan to introduce a guaranteed premium for LTC. Mr. Elias supports the non-guaranteed approach, noting that critical illness insurance rates have risen from 30% to 50% since 1995 largely because of the heavy burden of guaranteed premiums on some insurers.
He cited figures that show life expectancy is increasing by two years each decade. From a rate of age 46 for women, and age 42 for men in 1900, it rocketed to 81 years for women and 78 years for men in 2000. This is fuelling forecasts of a rising number of claims with longer durations because insured can live longer after suffering a disability.
Manulife and RBC guarantee the premium for five years. “We have no intention of extending the duration of this guarantee,” Mr. Jorgensen confirmed.
For its part, RBC is reining in the increase within a specific threshold. “If we have to raise our premium, it will not exceed 50% of the cost that the insurer pays today,” says Ms. Kasperski. She adds that RBC wants to revamp its product, but did not elaborate.
Ms. Coulombe said that guaranteed premiums for the Clarica LTC product are conceivable, but not over the short term. “What counts the most is that people are increasingly aware of the importance of long-term care insurance.”