There are only a handful of players in the long-term care insurance market. But the popularity these products are starting to experience is likely to turn a lacklustre environment into a vibrant one.
Long-term care insurance (LTC) is the rising star of living benefit products, states Richard Elias, Eastern Canada Director of Marketing, Living Benefits at Manulife Financial, a leading player in LTC. “To date, the industry has been focusing on developing critical illness products, somewhat to the detriment of the long-term care market,” says Mr. Elias. However, he thinks the need for such a product is enormous.
“Long-term care business is still growing slowly, but faster than when the product was first launched seven years ago,” notes Carmen Paquette, Quebec Sales Network Assistant at RBC Insurance.
This insurer is hoping to post significant growth in this line by the end of 2002. “Our sales totalled $1.3 million of new premiums in 2001,” says Ms. Paquette. RBC Insurance, considered by many brokers to be the top name in the LTC market, has agreed to share some revealing figures. “We had 2,700 LTC insurance policies in force at June 3, 2002,” she reports.
In terms of customer profile, the average age of policyholders is 62, explains Ms. Paquette. The average age for claimants wanting service at a LTC facility is 73, falling to 70 for those claiming benefits for home care. Alzheimer’s sufferers are the most frequent claimants at RBC, as well as insured who have suffered an accident resulting in a fracture.
Teresa Walkey, Director of Living Benefit Products at Manulife, is aware of the growing popularity of LTC. She says that the insurer met its sales target, while declining to specify what it was. She admits to receiving a certain number of claims, which she considers only natural, “since we have been selling the product for five years.”
LTC attracting more attention
Ms. Walkey explains that she has received many requests from brokers for presentations on her product. “Our LTC is starting to catch the public’s attention. Sales are going to take off in the next few years.” The insurer inherited the LifeCare product from Commercial Union when it acquired its life and health insurance operations.
For her part, Ms. Paquette observes that people are much more aware of how expensive loss of autonomy can be. “People know more about the cost of staying at a long-term care facility. I’ve done about a hundred presentations on our product in the past year, and I can see that the brokers are getting more interested.”
Clarica and, more recently, Liberty Health are present in this market. Other companies have chosen to enter the LTC market indirectly, by integrating a feature or rider allowing policyholders with critical illness insurance to receive one or more benefits when they are no longer able to carry out two or more activities of daily living. The same definition is found in individual LTC policies.
UnumProvident Canada has been offering this feature in the form of a rider to its critical illness insurance for several years now. Under it, a policyholder with loss of autonomy can receive the critical illness insurance benefits in equal monthly payments over a period of 60 months. Empire Financial Group and Standard Life recently followed suit. But in their case, the critical illness insurance payout is made in one lump sum.
Brokers starting to warm up
Brokers, who initially turned a cold shoulder to the product, are starting to sell more and more. This is true for independent broker Henry Markey, who to date has sold more than 80 LTC policies.
Mr. Markey’s strategy is to target wealthy customers and offer them reasonably-priced policies. “The only real objection I’ve heard from potential customers is the price!” However, he acknowledges that potential customers may be reluctant to talk about the possibility of losing their independence.
Of the policies he has sold, Mr. Markey has received claims on three. He targets people aged 55 and over with a net worth of under $2 million, or $3 million for couples. But age isn’t necessarily a barrier. “I’ve sold three policies to people in their 40s,” he points out.
Mr. Markey’s advice is to avoid trying to sell policies that are too expensive. “Instead, sell policies with daily benefits that vary from $50 to $100. No more than that.”
Lawrence Geller, an independent broker who moderates an online forum for financial advisors, For Advisors Only, also sells LTC coverage. He reports that he has sold some 15 policies, some as riders, others freestanding. “Brokers aren’t doing enough to satisfy the long-term care needs the public isn’t expressing yet. Making them aware of these needs is first and foremost a matter of training.”