Life-LTC Combo Product Sales Dropped in 2020: LIMRA

The COVID-19 pandemic may have hurt some U.S. consumers’ efforts to plan for future long-term care (LTC) needs.

Consumers bought only 421,000 individual life insurance policies that can provide LTC benefits, or similar types of benefits, in 2020, according to new LIMRA issuer survey data.

The number of life-LTC combination products sold was down 7% from the 2019 total.

Total combo product sales premium volume fell 23%, to $3.7 billion, and the average amount of premium revenue per new combo product sold fell 17%, to about $8,800 per policy.

Consumers can use two types of life combo products to pay for LTC services.

One is a policy with a provision that pays benefits to people who have a clear-cut need for LTC services, meaning that they suffer from severe dementia or need help with two or more activities of daily living.

Another type of combo policy pays benefits to an insured who suffers from a serious chronic illness.

Sales of life combo products that offer chronic care benefits, rather than true LTC benefits, continued to gain in popularity in 2020, and they accounted for about two-thirds of 2020 combo product policy sales, according to LIMRA.

Carriers reported that much of the drop in combo product sales was due to a decrease in use of the extension-of-benefit features that come with some universal life and whole life products.

Austin Tewksbury, a LIMRA analyst, said in a comment on the data, included in the survey results announcement, that those types of sales are relatively complicated, and that COVID-19 pandemic conditions may have made the extension-of-benefit transactions especially difficult to complete.

Low interest rates may be another villain.

Combo product issuers use earnings on bond portfolios to cover some of the benefits costs. Interest rates on bonds have been low in recent years. Seven of nine combo issuers surveyed by Milliman last year said that low rates had forced them to increase combo product prices at least once in the previous 12 months.

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European Compliance Association

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