Toronto-based Manulife Financial Corp. has discontinued sales of long-term care (LTC) insurance. In addition, the future of the product in Canada is becoming doubtful as other carriers report that sales of LTC insurance are stagnating.
Manulife announced in early November that it would halt new sales of its individual LivingCare LTC insurance, effective Nov. 30.
LTC insurance is a form of insurance that helps policyholders cover the costs of a stay in a nursing home or other types of care required in the event that the policyholder is unable to care for him- or herself.
Manulife attributes the decision to “limited market acceptance” of the product, as well as the new federal Genetic Non-Discrimination Act, which restricts insurance companies’ access to insurance applicants’ genetic testing information during the underwriting process.
Manulife’s exit from the LTC market leaves only a small handful of companies in Canada that offer LTC insurance. The two largest providers – Toronto-based Sun Life Financial Inc. and Lévis, Que.-based Desjardins Financial Security Life Assurance Co. (a.k.a. Desjardins Insurance) – report that sales of LTC insurance in recent years have been flat at best.
In fact, Desjardins Insurance experienced its first-ever decline in sales of LTC insurance in 2016, according to Nathalie Tremblay, health products manager, individual insurance, with Desjardins Insurance.
“There’s no question that [LTC insurance] hasn’t quite caught on with Canadians at large,” adds Dean Chambers, vice president, individual insurance, with Sun Life. “Our experience – and I believe the experience of the industry – has been relatively flat sales over the past few years.”
Manulife’s retreat from the LTC market follows Mississauga, Ont.-based RBC Life Insurance Co.’s move to discontinue sales of its LTC product in 2012.
Unless Canadians begin to embrace the product in larger numbers, other companies are likely to follow suit, says Tim Landry, living benefits consultant with QTR Solutions in Montreal.
“If we don’t start getting more sales, I think at some point in time, we’ll end up losing [LTC insurance] entirely,” Landry says. “That worries me.”
Chambers, for his part, is optimistic that sales of LTC insurance will pick up as Canada’s population ages. However, if demand fails to grow, he adds, carriers may reconsider selling the product.
“The insurance industry understands that there’s a need [for LTC insurance], and Canadians hopefully will soon understand that need,” Chambers says. “But, at the end of the day, if people tell us they don’t need it, then we’ll find other problems to solve for them.”
An even more drastic trend is occurring in the U.S., a much larger LTC market than Canada. New sales of stand-alone LTC policies have plummeted by 60% in the U.S. since 2012, according to Windsor, Conn.-based global insurance association LIMRA International Inc.
During that time frame, 11 companies have exited the LTC insurance market in the U.S., according to Elaine Tumicki, corporate vice president at LIMRA: “Stand-alone LTC [insurance] has had a difficult time over the past decade or so.”
Industrywide statistics in Canada aren’t reported by LIMRA anymore, given the relatively small market. In 2014, the most recent year for which statistics are available, LIMRA reported that approximately 83,600 Canadians had LTC insurance coverage, and LTC insurance generated annualized new premiums of about $8.9 million – a 17% decline from the previous year.
One of the main factors driving the decline in LTC insurance sales is the hefty cost of premiums, Tumicki says: “Stand-alone LTC [insurance] is not an inexpensive product. So, it may not be within reach of many people who think they may need the coverage.”
In addition, most LTC premiums are not guaranteed, so carriers have the ability to increase or decrease premiums on blocks of in-force policies to reflect changes in the cost of providing the coverage, which would be due to factors such as economic conditions, claims experience and lapse rates.
In 2015, for example, Sun Life increased premiums on most of its in-force LTC insurance policies. Many U.S.-based carriers also raised their premiums in recent years.
That trend makes many financial advisors nervous about selling LTC insurance, Tremblay says: “Advisors like to rely on products that have guaranteed pricing because once there’s an increase in price, they have to contact the client and explain why.”
The lack of uptake of LTC insurance is of concern, Landry says, because that trend suggests Canadians aren’t planning for the possibility that they’ll require LTC as they get older or for the significant costs associated with that care.
“We need to find a way to make clients aware of the potential problem,” Landry says.
In the U.S., despite the dramatic drop in sales of stand-alone LTC insurance, there has been a surge in sales of products that combine LTC insurance with life insurance. A growing number of carriers in the U.S. offer life insurance products with LTC riders, which enable policyholders to access a portion of the life insurance policy’s death benefit in the event LTC benefits are required.
Desjardins Insurance introduced this type of hybrid product in Canada in 2013, with its Life LTC Advance product. The hybrid concept appeals to some clients and advisors more than stand-alone LTC insurance, Tremblay says, because the hybrid product is a more affordable way of obtaining LTC insurance coverage, the underwriting process is easier and clients can take comfort in knowing that the policy will pay a benefit regardless of whether the client ends up needing LTC.
Although the hybrid concept still is new in Canada’s marketplace, the product’s growing popularity in the U.S. could prompt more carriers in Canada to offer the LTC rider. “Maybe that’s the next evolution,” says Chambers.
Although Manulife pointed to new genetic non-discrimination legislation as a factor driving the company’s decision to cease new sales of LTC insurance, other carriers have stated they don’t anticipate the new law will affect LTC insurance to a greater degree than other insurance products.
Manulife’s decision to discontinue LTC policy sales doesn’t affect in-force LivingCare policies or in-force disability or critical illness insurance policies that include LTC features and options.
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