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| Note from Brian Gordon | | 
It's hard to believe, but the holidays are just around the corner. Soon, 2010 will draw to a close, and we will usher in a brand new year. For those of us in the Long Term Care Insurance industry, it's been a complex, thought-provoking year.
At MAGA, we are lucky to have our own resident historian on hand to help place it into context: our founder and my father, Murray Gordon. With 40 years of experience in his rearview mirror, he brings a unique perspective to the events of the year. See his take on 2010 below.
Of course, the big question on many of our minds is: what will 2011 hold? While we don't have a crystal ball, we're not afraid to make an industry prediction or two, as you'll read in Peter Florek's forecast.
Finally, from our family to yours, here's to a happy, healthy holiday season. May you enjoy some joyful, relaxing family time, and may the new year hold great things!
Brian
Brian Gordon, CLTC, is President of MAGA, Ltd.
email Brian
Call Brian at 847-656-9111
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A Founding Father of Long Term Care Speaks
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"What a long strange trip it's been." That's what the Grateful Dead sang back in 1970, when I was a budding insurance exec and Long Term Care Insurance was in its infancy. Forty years later, and these words ring truer than ever. Reflecting back on the year, I keep thinking about LTCI's origins and how it's impacting what we're seeing today: an industry that continues to change. Certainly, the economy has played a role. The business outlook, in general, is more conservative than it was several years ago. But this isn't just about the economy. In the scheme of things, LTCI is a teenager among insurance products, and I believe what we're witnessing is growing pains. For example, disability income insurance has been around now for 100 years. Initially, waves of carriers entered and exited the market, but eventually it stabilized and consolidated. Now, with a century of claims experience under their belts, DI actuaries know how to price it and underwriters know how to evaluate health risks more accurately. There's a comfort level there.
We're not quite at that point yet with LTCI, despite an accelerated learning curve. We're just starting to see utilization climb, and no one knows how high it will go. Not only are insureds filing more claims, they're collecting bigger benefits, and for longer periods. Over the years, we've helped our clients collect millions in benefits, with some payouts reaching $300,000-$450,000.
Because the cost of care is rising, so are daily benefits. Believe it or not, those first policies paid no more than $20 a day for nursing home care. Today, the average daily benefit is $150 and most policies also include benefits for home care and assisted living, too. One of the intriguing things about LTCI is that it keeps evolving (see Peter's article below).
On another note, 2010 also brought us our first glimpse of CLASS (Community Living Assistance Services and Supports), the limited LTC program included with health care reform. CLASS doesn't kick-off until 2013, and its benefits are so modest, it won't be a viable solution for most Americans. But the fact that it was included at all will be helpful in raising consumer awareness.
Think about it: before 1996, there were zero tax advantages to purchasing an LTCI policy. Now, thanks to HIPAA and subsequent legislation, there are many tax benefits. Why? Because our lawmakers now recognize the value of LTCI. CLASS is a government attempt to make LTCI more accessible...and that's a good thing. Put it all together, and what can be learned from 2010? That both the industry and its products are still evolving. And so is the need for LTCI!
Murray
Murray Gordon, founder and CEO of MAGA, Ltd.
email Murray
Call Murray at 847-656-9112 |
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Peter Florek Answers Your Questions
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What Will 2011 Bring?
I am not a fortune teller by any means, but I do pay attention. Inherent to my position as a specialist in long term care planning is keeping tabs on industry news and staying on top of emerging trends. With that in mind, here are a few subjects that I believe you will be hearing more about in 2011.
- Linked benefit insurance (hybrid) will continue to garner more attention. As I've written in past issues and presented at a few conferences this year, linked benefit insurance products are an emerging trend. Although they have been available for many years, new tax law (PPA '06) allows for a tax deferred transfer of non-qualified cash value life insurance or annuity into a linked benefit product that includes benefits to pay for long term care. For those who have decided to self-insure this is a way to better leverage their position.
- LTCI claim payments will continue to increase. According to John Hancock and Genworth Financial, together they paid over $5 million in claims EVERY DAY in 2009. Demographics suggest that these numbers will not be decreasing anytime soon.
- Clients will need more input. The days of cookie-cutter policy designs are over. With the aforementioned linked benefit products, new LTCI product development and pricing, volatile economic conditions, and uncertainty about what government assistance may or may not be available in the future, clients will rely on advice from their financial advisors more than ever. Fortunately, we are here to assist.
Peter Peter Florek, CLTC, Vice President of MAGA, Ltd.
email Peter
Call Peter at 847-656-9114
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