Remember that unusually gifted athlete from your high school days? You just knew that kid was going to make it big some day. But for some reason, it just never happened.
Long-term care insurance is sort of like that can’t–miss jock. There was a time when it looked as if this product would challenge and maybe even surpass all other payment sources. But alas, things didn’t turn out that way.
Although more than 100 companies were selling policies in 2002, the total trickled down to about a dozen by the decade’s end. These days, it is pretty much down to the big three: Genworth (1.25 million covered lives), John Hancock Life Insurance Co., (just under 1 million covered lives) and Unum Life Insurance Co. of America (which covers 865,000 people).
So all things considered, Genworth suddenly announcing that it is bullish on the sector is extremely welcome news. Genworth said that it plans to “separate and isolate” its long-term care business (which includes assisted living and home care) from lesser-performing parts of its portfolio.
It may be too soon to know whether Genworth’s intentions signal the start of a rebound. Regardless, this certainly a good sign — especially if you happen to be running a senior living community. That’s because, warts and all, private insurance tends to be a pretty good revenue source. It’s certainly a lot more generous than Medicaid.
But if private insurance is to re-emerge as a legitimate player, some changes will be needed.
For one, more potential customers will need to be convinced the product can be trusted. The jury is still out on that notion. Too many carriers are guilty of the adage about the big print giving, while the small print takes away. Whether or not carriers want to admit it, insurance policies do not have a sterling reputation. And simply continuing to air “what if Daddy dies?” commercials is hardly the best marketing response.
Moreover, given how sensitive carriers are to sales, it’s pretty clear that analytics will need to play a bigger role. That’s especially the case when it comes to blunting the possible effect of changing interest rates. You can bet that analytics also will play an increasing role in indexing premiums and benefits.
It’s also a safe bet that firms will try to remove some of the more risky policy provisions.
Clearly, insurers have learned some hard lessons about how to price and manage this product. For the sake of senior living operators, let’s hope they apply those lessons in ways that foster future growth and trust. A robust insurance market that serves the needs of policyholders while enhancing carriers’ profits would be a beautiful thing for all involved.
I’m betting the carriers will be smart enough to work toward this outcome. For despite numerous setbacks, they still have a lot of potential.