Slimmed-down long-term care products are designed to appeal to cost-conscious clients

By Megan Harman | Mid-January 2014

With many clients shying away from purchasing long-term care (LTC) insurance because of rising premiums, insurers have begun developing alternative LTC products that aim to make this type of coverage more affordable and accessible.

In December, Toronto-based Sun Life Financial Inc. launched Sun Retirement Health Assist (SRHA) - a new version of LTC insurance geared toward retired clients that has a simplified application process, less generous features and lower premiums. Sun Life designed the product in response to two common complaints from financial advisors regarding traditional LTC insurance: the relatively high cost of premiums; and the strict underwriting process, which can make it difficult for clients to get coverage.

"[Advisors] told us that they want to help more clients qualify for the coverage and have more options to match the cost of the solution to the client's financial plan," says Paul Fryer, vice president, individual business management, with Sun Life. "So, we launched Sun Retirement Health Assist really to fill that gap."

The new product comes a few months after Lévis, Que.-based Desjardins Financial Security Life Assurance Co. unveiled its Life LTC Advance - a hybrid product that combines LTC coverage with life insurance. Similar to SRHA's attributes, LTC Advance is easier for clients to qualify for and is more affordable than a traditional LTC insurance policy.

Insurance industry-watchers are encouraged to see some innovation in the LTC insurance space; previously, there had been little difference among the products on the market.

"Insurance companies are looking for a way to be more relevant, to make their products more appealing," says Karen Henderson, an LTC insurance specialist and CEO of Long Term Care Planning Network in Toronto. "I applaud the companies that are doing this."

Henderson suspects that the new products will allow the industry to tap into a new market of prospective clients, particularly as these products reduce the cost of LTC insurance coverage. Specifically, the premiums on the new SRHA product are 30%-60% lower than Sun Life's traditional LTC product. And premiums on a life insurance policy with LTC Advance included are, on average, 15% higher than a regular life insurance policy - a supplemental cost that amounts to significantly less than a stand-alone LTC policy.

"LTC has always been seen as sort of an elitist, expensive product," Henderson says. "This [product innovation] is a welcome addition to the market, and I'm hoping that advisors will pick up on it."

The introduction of more affordable LTC insurance products is especially welcome at a time when the price of traditional LTC products has been rising across the industry. Most recently, Sun Life announced in December that it was raising premiums on new LTC insurance polices by an average of 20% in response to low interest rates, which have squeezed the profitability of the products.

Next: Certain features dialed back