What s New in True Group? 2006 LTCi National Producers Summit November 6, 2006 Austin, Texas

Transcription

1 What s New in True Group? 2006 LTCi National Producers Summit November 6, 2006 Austin, Texas

2 Panelists Cathi-Lynne Ames National Sales Director MetLife Long-Term Care Group Chuck Breen Regional Sales Vice President John Hancock Group Long-Term Care Malcolm Cheung Vice President, Long-Term Care Prudential Insurance Company of America 2

3 The GLTCI Marketplace

4 Market Snapshot 2005 New Sales Inforce # of Group Plans 1,026 # of Group Plans 7,288 Total Premium $64,728,000 Total Premium $1,078,561,000 Total Insureds 112,282 Total Insureds 1,792,711 LIMRA Reports, U.S. Group Long Term Care Insurance Sales and In-Force

5 Employer Interest Continues to Grow Number of Employer Groups Installing a GLTCI Plan by Year 7,288 1,035 1,294 3,079 2,390 1,802 3,759 4,410 5, % Total Increase Over 10 Years 5,801 6, LIMRA Reports, U.S. Group Long Term Care Insurance Sales and In-Force through

6 Top Five Carriers Dominate the Industry New Sales Inforce Rest 3% Rest 9% Top 5 97% Top 5 91% *Total new premium includes new sales, plus reenrollment premium. LIMRA reports,

7 GLTCI Market Potential Size of Business (Employees) ,000 1,001-5,000 5,001+ TOTAL Total Number of Businesses in the U.S. 5,640,407 8,572 6,931 1,864 5,657,774 Total Number of Businesses offering LTCI Total Number of Businesses NOT offering LTCI 3, ,801 5,636,578 7,818 6,351 1,226 5,651,973 Source: Estimates based on data from U.S. Census Bureau, LIMRA and HIAA Employer s Guide to LTCI, Source: LIMRA year-end data, 2003; U.S. Census Bureau, 2001; HIAA Employer s Guide to LTCI,

8 Why Employers Offer LTCI

9 LTCI Supports Employer and Employee Goals Enhances benefits packages to attract and retain talented employees Helps regain lost productivity by relieving caregiver stress Helps secure retirement savings Maintains employee independence Provides coverage not available with other insurance Removes reliance on government programs 9

10 GLTC Highlights

11 Group LTC Highlights Group master policy issued to employer Certificates of insurance issued to each insured member Guaranteed issue for active employees during open enrollment Offered on an underwritten basis to family members and retirees Group premium structure (generally less expensive) Employer-funded and voluntary plans available Carrier-driven solicitation and enrollment process with employer oversight and involvement 11

12 Group LTC Highlights (continued) Robust website for easy enrollment Toll-free customer service and support On-site meetings Centralized premium collection and remittance Convenience of payroll deduction Fully portable Reserve transfers generally available Opportunities for rate guarantees and performance standards 12

13 Multi-Life Highlights

14 Multi-Life LTC Highlights Individual policies issued to each insured member Generally greater flexibility in policy designs Discounted standard rates, or multi-tier rates Typically simplified underwriting for active employees Offered on an underwritten basis to family members and retirees Typically direct-bill or EFT Fully portable 14

15 Multi-Life Highlights (continued) Little adverse selection risk Reserve transfers not available Multiple discounts available No long term rate guarantees Agent/broker driven solicitation and enrollment process with employer oversight and involvement Toll-free customer service support May be administered by an MGA 15

16 Ideal Markets - Group Size Demographics 40/40 Rule Target industries Limited number of locations Electronic access to employees Corporate commitment Voluntary benefits 16

17 Ideal Markets Multi-Life Size Demographics 40/40 Rule Target industries Limited number of locations Electronic access to employees Corporate commitment Voluntary benefits 17

18 The Keys to GLTCI Enrollment Success

19 Four Factors that Influence Enrollment Demographics Age, salary, education Industry Type Participation in Other Voluntary Benefits 401(k), FSA, Supplemental Term Life, etc. Employer Size and Population Dispersion 19

20 How Employers Can Maximize Enrollment Timing of enrollment Number of plan decisions Communication effort Ease of enrollment Payroll deduction Employer support 20

21 Timing of Enrollment Timing of Enrollment and Effect on Participation* 7.9% 5.6% 3.9% Before open enrollment During open enrollment After open enrollment *The Effect of Timing of Group Long-Term Care Enrollment on Plan Participation, prepared for LTC Partners, LLC, Forbes Consulting Group. August,

22 Number of Plan Decisions Required of Applicants Number of Plan Decisions and Effect on Participation* 8.1% 6.5% 5.4% 3.2% *Ways to Maximize Participation, Forbes Consulting Group. May,

23 Communication Effort Number of Communication Impressions and Effect on Participation* 10.6% 7.5% 4.4% 4.9% 2 to 4 5 to 7 8 to *Ways to Maximize Participation, Forbes Consulting Group. May,

24 Ease of Enrollment Percentage of Employees Who Enrolled Through Web Site Technology Firm 83% University 81% Computer Firm 76% Law Firm 76% Municipality 68% Financial Institution 63% Pharmaceutical Company 54% 24

25 Payroll Deduction Payroll Deduction and Effect on Participation* INITIAL ENROLLMENT RETENTION RATE 94.0% 6.7% 5.7% 75.0% Payroll Deduction No Payroll Deduction Payroll Deduction No Payroll Deduction *Ways to Maximize Participation, Forbes Consulting Group. May,

26 Employer Support On average, enrollment was twice as high for plans that were endorsed and supported by employers versus those plans that were not.* Employer Support No Employer Support *Ways to Maximize Participation, Forbes Consulting Group. May,

27 Weighted Average Enrollment by Industry Law Shipping Government Chemical University Energy Financial Services Advertising/Marketing Retail Manufacturing Aerospace/Defense Publishing Biotech Tech Telecom Healthcare Education 2.5% 2.5% 3.1% 5.1% 4.8% 4.8% 4.6% 5.4% 5.1% 7.0% 6.0% 8.0% 7.8% 7.2% 9.2% 8.6% High Participation Average Participation Low Participation 14.7% *Analysis of the Group Long-Term Care Insurance Initial Enrollment Database, Forbes Consulting Group,

28 Top Reasons for Purchasing LTCI Long Term Care Insurance... allows individual to not be a burden on family 50% avoids giving away savings to nursing homes or home care agencies allows in-home care for as long as possible preserves independence/puts individual in charge of care alleviates concern over future health care costs allows assets to be preserved so an estate can be left gives the flexibility to choose caregivers and settings gives access to higher quality care prevents going on Medicaid 42% 41% 39% 39% 38% 36% 31% 27% *LTC Consumer Segmentation Study conducted by Jeremy Pincus, Forbes Consulting, January

29 Continuing Challenges Fear leads to denial Two-thirds of the respondents agreed that it is difficult to admit that they might need LTC in the future Half of the adults surveyed think that going to a nursing home is worse than dying Of those individuals who might consider paying out-of-pocket, close to half (46%) cannot afford more than one year in a nursing home Lack of knowledge results in confusion Less than one-third of respondents were aware that nearly 40% of the LTC population is under age 65 43% were unaware that eligibility for Medicaid requires that an individual spend-down to state-prescribed levels 39% incorrectly assume that Medicare is the primary funding source for most seniors LTC costs 29

30 Continuing Challenges Competing priorities cause inaction 39% are worried about financing their children s education 59% are worried about financing their own retirement Focus on cost overshadows value of coverage Nearly one-third incorrectly believed that an average one year stay in a nursing home is $30,000, when the actual figure is more than twice that, at $71,000 Over half (57%) the respondents thought that the average stay in a nursing home exceeded four years 46% of Seniors and Baby Boomers could not estimate the cost of LTCI coverage per month 30

31 Favorable View of LTCI 57% are worried about the impact LTC could have on their lives 89% of Baby Boomers and 81% of Seniors expressed concern that a LTC scenario could affect their retirement income and assets 42% see LTCI as the best solution for those needs 78% say it is best to purchase LTCI before age 60 81% believe that even healthy people need LTCI 31

32 Favorable View of LTCI 89% of Baby Boomers and Seniors identified not being a burden on family as the best reason for buying LTCI 79% view LTCI as allowing you to receive care where you choose and as a way of retaining control over care decisions 76% would purchase LTCI to preserve assets for a spouse 74% see LTCI as a way of ensuring that you receive high quality care 32

33 The Future of GLTCI Demographics will drive participation Aging of the population Traditional sources of funding are less reliable Government programs and pensions There is government support for LTCI Long Term Care Consumer Awareness Campaign Deficit Reduction Act State tax credits Pre-tax deductions Technology will play an increasing role in education Web casts and online enrollments Employer-subsidy and executive carve-out plans Tax advantages 33

34 True Group vs. Multi-Life: Pricing, Profitability & Plan Upgrades

35 Questions What multi-life vs. true group plan features affect price? What are the pricing and profitability implications? Is one priced more adequately than the other? Plan Upgrades/Reserve transfers: How big an advantage for true group? 35

36 Underwriting True Group: Guaranteed issue for actively-at-work employees Others usually simplified issue or fully underwritten Individual Multi-life: Usually simplified issue for actively-at-work employees Others usually fully underwritten Minimum participation requirements 36

37 How Does Underwriting Affect Claim Incidence? Select Factors reflect lower initial claim incidence due to underwriting Select Factor Full UW Simplified UW Guaranteed Issue Policy Duration Source: Society of Actuaries Long Term Care Experience Committee Intercompany Study

38 How Does Underwriting Affect Mortality? Mortality by Underwriting Type 6% 5% Mort Rate 4% 3% 2% Full UW Simplified Guar Iss 1% 0% Iss Age Iss Age Iss Age Iss Age Source: Society of Actuaries Long Term Care Experience Committee Intercompany Study

39 Do Individual & Group Lapse Rates Differ? Study compared lapse rates by policy type Lapse Rates By Duration and Policy Type Lapse Rate 16% 14% 12% 10% 8% 6% 4% 2% 0% Duration Individual Group Source: Society of Actuaries Long Term Care Experience Committee Intercompany Study

40 Lapse Rates (continued) Study also compared lapse rates by type of underwriting Group Early Lapse Rates by Underwriting Type 20.00% 16.00% Lapse Rate 12.00% 8.00% 4.00% Full Simplified Guaranteed 0.00% Duration Source: Society of Actuaries Long Term Care Experience Committee Intercompany Study

41 Other Differences That Affect Price/Profitability Case size/participation rate is this only a group issue? Acquisition costs producer compensation, uw & issue costs Maintenance costs billing method, inflation increases, experience monitoring & reporting, plan upgrades Mix of business individual plans often have richer benefits Premium rate discounts common in individual, rare in group Rate guarantees often included in group contracts Average issue age impacts investment strategy and returns 41

42 Is Group More Adequately Priced Than Individual? Rate increases on in-force business have been made on some individual plans, but few if any have been made on group plans IF group is more adequately priced, possible reasons include: Group product introduced later than individual product Group lapse assumptions closer to actual experience Group product designs are not as rich Price not as significant a competitive factor Employer usually doesn t contribute Sale influenced by: relationship, references, reputation, service 42

43 What is a Plan Upgrade? Although plan upgrades are feasible in the individual market, most plan upgrade programs to date have been offered to group plan participants Offer plan participants the ability to convert existing coverage to a more modern policy form Comparable new coverage provided on an original issue age basis Can be accompanied by an offer of a limited increase in coverage levels on a GI basis More significant coverage level increases are fully underwritten Upgrading another insurer s plan: plan takeover 43

44 What s in it for the insurer? Meet employer sponsor expectation that LTC benefits remain modern and competitive Defensive measure to prevent sponsor from rebidding the program Opportunity to generate additional premium from existing insureds Opportunity to conduct open re-enrollment for nonparticipants offering new, upgraded plan 44

45 What s in it for the insured? Maintain modern benefit design without losing original issue age rating Potential opportunity to increase/change existing coverage on a GI basis Possible reduction in premiums for comparable or better benefits 45

46 What s in it for the employer sponsor? Highlights value provided by the plan sponsor Minimizes criticism that benefits not competitive with what is currently available in ILTC market Helps sponsor avoid re-bidding the program 46