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Consumers increasingly turning to combination products for long-term care needs

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Consumers increasingly turning to combination products for long-term care needs

The ranks of U.S. insurers offering individual long-term care policies shrank further in 2018, as sales of so-called acceleration products continued to expand.

Acceleration products, commonly referred to as linked, hybrid, or combination products, have grown in popularity over the past several years. Research by LIMRA has shown that consumers are increasingly attracted to such products as a way of ensuring access to some long-term care protection while still providing a value if the LTC benefit ends up not being needed.

Acceleration products allow access to the death benefit for long-term care services, if needed, with the remainder of the benefit payable to the beneficiaries when the policyholder dies.

The number of insurers offering individual long-term care has decreased over the past several years, while more companies have begun marketing acceleration products. Brighthouse Financial Inc. in February launched a new indexed universal life hybrid product, its first life insurance product launch since becoming an independent company in 2017.

Brighthouse is "excited to enter the growing hybrid market as we focus on rebuilding our presence in the retail life insurance market," according to CEO Eric Steigerwalt.

In-force policy counts for individual LTC continue to significantly outnumber those for acceleration products, but since 2014, the individual in-force count has fallen by nearly 400,000, while acceleration in-force counts have risen by nearly 200,000, or over 50%, according to analysis by S&P Global Market Intelligence.

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Two insurers, Northwestern Mutual Life Insurance Co. and Aegon NV's U.S. Transamerica subsidiaries, increased their in-force policy counts for acceleration products by over 50% in 2018 alone. Transamerica's rose by 58.2% to cross the 100,000 mark for the first time, while Northwestern Mutual's policy count rose by 60.4% to 19,479 during the same period.

Meanwhile, sales of traditional individual LTC products have slumped for both insurers over the past several years. Northwestern Mutual once led the LTC industry, with more than 22,000 new LTC policies issued in 2015, but that number had fallen to about 10,200 policies issued in 2018. Transamerica issued 5,061 individual LTC policies in 2018, about 2,800 policies lower than the previous year.

In total, the industry issued only 58,017 new individual long-term care policies in 2018, compared with 68,110 in the prior year.

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Acceleration product data is reported within the NAIC long-term care experience reporting form 4 and provides some evidence of the trend, but does not show the full market. Details within the long-term care experience reporting supplement pages are based on rates rules that govern the Long-Term Care Insurance Model Regulation.

For life and annuity contracts that have no portion subject to these rate rules or where the LTC benefit is incidental, the insurer is not required to file details within the LTC reporting forms. The benefit would be deemed incidental if the value of the LTC benefit is less than 10% of the total value of the benefit provided over the life of the policy.

Of the insurers reporting statutory supplement data, Lincoln National Corp. remains the insurer with the largest number of in-force acceleration policies with nearly 181,000 as of year-end 2018.

S&P Global Market Intelligence provides links to external sites where these offer further, relevant information to our readers. While we ensure that such links are functional at the time of publication, we are not responsible in instances where those links are unavailable later.

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Click here for statutory insurance-related industry documents for long-term care experience reporting forms 1 and 2.