There have been some significant changes in long-term careinsurance (LTCI) offered to corporate clients in 2010. The lessonsthat have been learned may lead to a dramatic shift in how LTCIis offered to groups in the future. This article will discuss someof the changes that have taken place and what to look for in2011.

Changes in group LTCI
Last year we saw a leading LTC insurer stop selling new groupplans, while another indicated they will stop accepting newadditions to existing groups. What happened? Much of the difficultywas based on original pricing assumptions that were wrong. Forexample, many thought that there would be many more policy lapsesthan what actually occurred. Whether people buy individual or groupLTC coverage, they will keep it, even with premium adjustments.

Because of the high policy retention, claims were much higherthan anticipated. Reserves were also under pressure from a lowinterest rate environment. In addition, the guaranteed issue natureof group LTC plans can lead to adverse selection as older andsicker employees gravitate towards coverage. Group plans have ahigher percentage of single policy holders, and industry claimsexperience shows that singles will be a bigger risk than marriedcouples. The same issue of adverse selection can affect small groupprograms using individual policy forms as well. When only 3applications are required for simplified underwriting, carriers maybe at risk for some sub-standard risks getting coverage. Takentogether, these factors created a difficult environment for groupLTCI.