There have been some significant changes in long-term care insurance (LTCI) offered to corporate clients in 2010. The lessons that have been learned may lead to a dramatic shift in how LTCI is offered to groups in the future. This article will discuss some of the changes that have taken place and what to look for in 2011.

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

Because of the high policy retention, claims were much higher than anticipated. Reserves were also under pressure from a low interest rate environment. In addition, the guaranteed issue nature of group LTC plans can lead to adverse selection as older and sicker employees gravitate towards coverage. Group plans have a higher percentage of single policy holders, and industry claims experience shows that singles will be a bigger risk than married couples. The same issue of adverse selection can affect small group programs using individual policy forms as well. When only 3 applications are required for simplified underwriting, carriers may be at risk for some sub-standard risks getting coverage. Taken together, these factors created a difficult environment for group LTCI.