Hartford, Conn. – Despite inroads made from a tax and regulatory compliance perspective, the long-term care insurance industry may need to re-examine its value proposition to breakout of the small subset of current clients and serve the broader market, according to a new study by Conning Research and Consulting, a Hartford, Conn., firm that covers 30 insurance market segments. But getting the right technology in place to support this effort will be a challenge, experts say.

The Conning Research study, “Long Term Care Insurance: Searching for the Value Proposition,” quantifies the market need and potential market scope, and identifies the current product features and pricing challenges. Further, the study presents potential industry responses to flagging growth.

“Today, long-term care insurance is sold primarily by specialist agents to a niche market of affluent and risk-averse seniors,” said Terence Martin, analyst at Conning Research & Consulting. Over the past few years, long-term care sales growth has declined in both individual and group markets despite the best efforts of insurers. “We have sized the potential market for Long Term Care Insurance and estimate that the current industry penetration is just 9%,” he said.

One element that supports the market’s growth is the passage in August 2006 of the Pension Protection Act, which allows carriers to combine life, annuity and long-term care applications from a tax and regulatory compliance perspective. For insurers, this means getting the technology in place to support co-existence and configurability. It also means that the technology solutions marketplace should respond with a variety of product introductions in the near future. But the question remains: Are carriers ready to adopt the technology necessary to support the new hybrid-product world?

“Despite considerable product innovation over the past few years, the long-term care insurance industry’s solutions still do not resonate with the broader market,” said Stephan Christiansen, director of research at Conning.

“Incremental product and pricing innovation and consumer education continue in an attempt to bridge this gap, but it is likely not enough to ensure significant consumer understanding and acceptance,” Christiansen said. “It may well be time for the industry to rethink the entire product offering in an effort to break new ground and change the value proposition.”

Sources: Conning Research, INN archives

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