what’s new in true group? - long term care insurance ... · top reasons for purchasing ltci long...

What’s New in True Group?

2006 LTCi National Producers SummitNovember 6, 2006

Austin, Texas

2

Panelists

Cathi-Lynne AmesNational Sales DirectorMetLife Long-Term Care Group

Chuck BreenRegional Sales Vice PresidentJohn Hancock Group Long-Term Care

Malcolm CheungVice President, Long-Term CarePrudential Insurance Company of America

The GLTCI Marketplace

4

Market Snapshot

# of Group Plans 1,026

Total Premium $64,728,000

Total Insureds 112,282

2005 New Sales

# of Group Plans 7,288

Total Premium $1,078,561,000

Total Insureds 1,792,711

Inforce

LIMRA Reports, U.S. Group Long Term Care Insurance Sales and In-Force. 2005.

5

Employer Interest Continues to Grow

LIMRA Reports, U.S. Group Long Term Care Insurance Sales and In-Force. 1994 through 2005.

Number of Employer Groups Installing a GLTCI Plan by Year

6,577

5,801

5,015

4,410

3,759

3,0792,390

1,8021,294

1,035

7,288

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

604% Total Increase Over 10 Years

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Top Five Carriers Dominate the Industry

Rest3%

Top 597%

New Sales

Rest9%

Top 591%

Inforce

*Total new premium includes new sales, plus reenrollment premium. LIMRA reports, 2005.

7

GLTCI Market Potential

Size of Business(Employees) 1-500 501-

1,0001,001-5,000 5,001+ TOTAL

Total Number of Businesses in the U.S. 5,640,407 8,572 6,931 1,864 5,657,774

Total Number of Businesses offering LTCI 3,829 754 580 638 5,801

Total Number of Businesses NOT

offering LTCI5,636,578 7,818 6,351 1,226 5,651,973

Source: Estimates based on data from U.S. Census Bureau, LIMRA and HIAA Employer’s Guide to LTCI, 2003.Source: LIMRA year-end data, 2003; U.S. Census Bureau, 2001; HIAA Employer’s Guide to LTCI, 2003.

Why Employers Offer LTCI

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LTCI Supports Employer and Employee Goals

• Enhances benefits packages to attract and retain talented employees

• Helps regain lost productivity by relieving caregiver stress

• Helps secure retirement savings

• Maintains employee independence

• Provides coverage not available with other insurance

• Removes reliance on government programs

GLTC Highlights

11

Group LTC Highlights

• Group master policy issued to employer

• Certificates of insurance issued to each insured member

• Guaranteed issue for active employees during open enrollment

• Offered on an underwritten basis to family members and retirees

• Group premium structure (generally less expensive)

• Employer-funded and voluntary plans available

• Carrier-driven solicitation and enrollment process with employer oversight and involvement

12

Group LTC Highlights (continued)

• Robust website for easy enrollment

• Toll-free customer service and support

• On-site meetings

• Centralized premium collection and remittance

• Convenience of payroll deduction

• Fully portable

• Reserve transfers generally available

• Opportunities for rate guarantees and performance standards

Multi-Life Highlights

14

Multi-Life LTC Highlights

• Individual policies issued to each insured member

• Generally greater flexibility in policy designs

• Discounted standard rates, or multi-tier rates

• Typically simplified underwriting for active employees

• Offered on an underwritten basis to family members and retirees

• Typically direct-bill or EFT

• Fully portable

15

Multi-Life Highlights (continued)

• Little adverse selection risk

• Reserve transfers not available

• Multiple discounts available

• No long term rate guarantees

• Agent/broker driven solicitation and enrollment process with employer oversight and involvement

• Toll-free customer service support

• May be administered by an MGA

16

Ideal Markets - Group

• Size

• Demographics – 40/40 Rule

• Target industries

• Limited number of locations

• Electronic access to employees

• Corporate commitment

• Voluntary benefits

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Ideal Markets – Multi-Life

• Size

• Demographics – 40/40 Rule

• Target industries

• Limited number of locations

• Electronic access to employees

• Corporate commitment

• Voluntary benefits

The Keys to GLTCI Enrollment Success

19

Four Factors that Influence Enrollment

DemographicsAge, salary, education

Industry Type

Participation in Other Voluntary Benefits

401(k), FSA, Supplemental Term Life, etc.

Employer Size and Population Dispersion

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How Employers Can Maximize Enrollment

• Timing of enrollment

• Number of plan decisions

• Communication effort

• Ease of enrollment

• Payroll deduction

• Employer support

21

Timing of Enrollment

7.9%

5.6%

3.9%

Before open enrollment During open enrollment After open enrollment

Timing of Enrollment and Effect on Participation*

*The Effect of Timing of Group Long-Term Care Enrollment on Plan Participation, prepared for LTC Partners, LLC,Forbes Consulting Group. August, 2004.

22

Number of Plan Decisions Required of Applicants

8.1%

6.5%

5.4%

3.2%

1 2 3 4

Number of Plan Decisions and Effect on Participation*

*Ways to Maximize Participation, Forbes Consulting Group. May, 2004.

23

Communication Effort

4.4% 4.9%

7.5%

10.6%

2 to 4 5 to 7 8 to 10 11+

Number of Communication Impressions and Effect on Participation*


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Ease of Enrollment

83%

81%

76%

76%

68%

63%

54%Pharmaceutical Company

Financial Institution

Municipality

Law Firm

Computer Firm

University

Technology Firm

Percentage of Employees Who Enrolled Through Web Site

25

Payroll Deduction

Payroll Deduction and Effect on Participation*

INITIAL ENROLLMENT RETENTION RATE

6.7%

5.7%

Payroll Deduction No Payroll Deduction

94.0%

75.0%

Payroll Deduction No Payroll Deduction


26

Employer Support

Employer Support No Employer Support

• On average, enrollment was twice as high for plans that were endorsed and supported by employers versus those plans that were not.*


27

Weighted Average Enrollment by Industry

2.5%2.5%

3.1%4.6%4.8%4.8%

5.1%5.1%

5.4%6.0%

7.0%7.2%

7.8%8.0%

8.6%9.2%

14.7%

Education

Healthcare

Telecom

Tech

Biotech

Publishing

Aerospace/Defense

Manufacturing

Retail

Advertising/Marketing

Financial Services

Energy

University

Chemical

Government

Shipping

Law

High Participation

Average Participation

Low Participation

*Analysis of the Group Long-Term Care Insurance Initial Enrollment Database, Forbes Consulting Group, 2004.

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Top Reasons for Purchasing LTCI

Long Term Care Insurance . . .

27%

31%

36%

38%

39%

39%

41%

42%

50%

prevents going on Medicaid

gives access to higher quality care

gives the flexibility to choose caregivers and settings

allows assets to be preserved so an estate can be left

alleviates concern over future health care costs

preserves independence/puts individual in charge of care

allows in-home care for as long as possible

avoids giving away savings to nursing homes or home care agencies

allows individual to not be a burden on family

*LTC Consumer Segmentation Study conducted by Jeremy Pincus, Forbes Consulting, January 2005.

29

Continuing Challenges

• Fear leads to denial– Two-thirds of the respondents agreed that it is difficult to admit that

they might need LTC in the future– Half of the adults surveyed think that going to a nursing home is

worse than dying– Of those individuals who might consider paying out-of-pocket, close

to half (46%) cannot afford more than one year in a nursing home

• Lack of knowledge results in confusion– Less than one-third of respondents were aware that nearly 40% of

the LTC population is under age 65– 43% were unaware that eligibility for Medicaid requires that an

individual spend-down to state-prescribed levels– 39% incorrectly assume that Medicare is the primary funding source

for most seniors’ LTC costs

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Continuing Challenges

• Competing priorities cause inaction– 39% are worried about financing their children’s education– 59% are worried about financing their own retirement

• Focus on cost overshadows value of coverage– Nearly one-third incorrectly believed that an average one year stay in

a nursing home is $30,000, when the actual figure is more than twice that, at $71,000

– Over half (57%) the respondents thought that the average stay in a nursing home exceeded four years

– 46% of Seniors and Baby Boomers could not estimate the cost of LTCI coverage per month

31

Favorable View of LTCI

• 57% are worried about the impact LTC could have on their lives

• 89% of Baby Boomers and 81% of Seniors expressed concern that a LTC scenario could affect their retirement income and assets

• 42% see LTCI as the best solution for those needs

• 78% say it is best to purchase LTCI before age 60

• 81% believe that even healthy people need LTCI

32

Favorable View of LTCI

• 89% of Baby Boomers and Seniors identified not being a burden on family as the best reason for buying LTCI

• 79% view LTCI as allowing you to receive care where you choose and as a way of retaining control over care decisions

• 76% would purchase LTCI to preserve assets for a spouse

• 74% see LTCI as a way of ensuring that you receive high quality care

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The Future of GLTCI

• Demographics will drive participation– Aging of the population

• Traditional sources of funding are less reliable– Government programs and pensions

• There is government support for LTCI– Long Term Care Consumer Awareness Campaign– Deficit Reduction Act– State tax credits– Pre-tax deductions

• Technology will play an increasing role in education– Web casts and online enrollments

• Employer-subsidy and executive carve-out plans– Tax advantages

True Group vs. Multi-Life: Pricing, Profitability & Plan Upgrades

35

Questions

• What multi-life vs. true group plan features affect price?

• What are the pricing and profitability implications?

• Is one priced more adequately than the other?

• Plan Upgrades/Reserve transfers: How big an advantage for true group?

36

Underwriting

True Group:• Guaranteed issue for actively-at-work employees• Others usually simplified issue or fully underwritten

Individual Multi-life:• Usually simplified issue for actively-at-work employees• Others usually fully underwritten• Minimum participation requirements

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How Does Underwriting Affect Claim Incidence?

00.10.20.30.40.50.60.70.80.9

1

Sele

ct F

acto

r

1 2 3 4 5 6 7 8Policy Duration

Full UWSimplified UWGuaranteed Issue

•Select Factors reflect lower initial claim incidence due to underwriting

Source: Society of Actuaries Long Term Care Experience Committee Intercompany Study 1984-2001

38

How Does Underwriting Affect Mortality?

Mortality by Underwriting Type

0%

1%

2%

3%

4%

5%

6%

Iss Age 50-59 Iss Age 60-69 Iss Age 70-79 Iss Age 80-89

Mor

t Rat

e Full UWSimplifiedGuar Iss


39

Do Individual & Group Lapse Rates Differ?

Study compared lapse rates by policy type

Lapse Rates By Duration and Policy Type

0%2%4%6%8%

10%12%14%16%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Duration

Laps

e R

ate

IndividualGroup


40

Lapse Rates (continued)

Study also compared lapse rates by type of underwriting

Group Early Lapse Rates by Underwriting Type

0.00%

4.00%

8.00%

12.00%

16.00%

20.00%

1 2 3 4 5 6

Duration

Laps

e R

ate

FullSimplifiedGuaranteed


41

Other Differences That Affect Price/Profitability

• Case size/participation rate – is this only a group issue?

• Acquisition costs – producer compensation, uw & issue costs

• Maintenance costs – billing method, inflation increases, experience monitoring & reporting, plan upgrades

• Mix of business – individual plans often have richer benefits

• Premium rate discounts – common in individual, rare in group

• Rate guarantees – often included in group contracts

• Average issue age – impacts investment strategy and returns

42

Is Group More Adequately Priced Than Individual?

Rate increases on in-force business have been made on some individual plans, but few if any have been made on group plans

IF group is more adequately priced, possible reasons include:• Group product introduced later than individual product• Group lapse assumptions closer to actual experience• Group product designs are not as rich• Price not as significant a competitive factor

– Employer usually doesn’t contribute– Sale influenced by: relationship, references, reputation, service

43

What is a Plan Upgrade?

Although plan upgrades are feasible in the individual market, most plan upgrade programs to date have been offered to group plan participants

• Offer plan participants the ability to convert existing coverage to a more modern policy form

• Comparable new coverage provided on an original issue age basis

• Can be accompanied by an offer of a limited increase in coverage levels on a GI basis

• More significant coverage level increases are fully underwritten

• Upgrading another insurer’s plan: plan takeover

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What’s in it for the insurer?

• Meet employer sponsor expectation that LTC benefits remain modern and competitive

• Defensive measure to prevent sponsor from re-bidding the program

• Opportunity to generate additional premium from existing insureds

• Opportunity to conduct open re-enrollment for non-participants offering new, upgraded plan

45

What’s in it for the insured?

• Maintain modern benefit design without losing original issue age rating

• Potential opportunity to increase/change existing coverage on a GI basis

• Possible reduction in premiums for comparable or better benefits

46

What’s in it for the employer sponsor?

• Highlights value provided by the plan sponsor• Minimizes criticism that benefits not competitive with what

is currently available in ILTC market• Helps sponsor avoid re-bidding the program

what’s new in true group? - long term care insurance ... · top reasons for purchasing ltci long...

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