Combo Products Still on the Rise

Consumers continue to be receptive to combination products, which is good news for a senior population in serious need of long-term care insurance coverage.

LIMRA announced June 17 that new premium sales of individual life combo products — also called hybrid or linked benefit products — jumped an impressive 62% in 2010, reaching $1.2 billion. This comes on the heels of double-digit growth in 2009, as well.

Catherine Ho, a LIMRA research actuary, called the jump “remarkable,” particularly following the 2009 growth. “In addition to carriers boosting their marketing campaigns, consumers’ growing desire for an alternative to stand-alone long-term care insurance (LTCI) has driven sales of these products. For some buyers, combination products are a more affordable alternative to stand-alone LTCI.”

It’s still a small part of the overall market, but the growth is encouraging. New sales of combo products represent just 6% of the individual life insurance market based on new premium. But with more than 26,000 policies sold in 2010, the policy count of combination products increased 69% over 2009 sales results.

Universal life combo products continue to be the biggest segment of this market, not just in premium, but also in new policies and insurance sold. New premium rose 58% from 2009, representing 80% of the combo products market. LIMRA also reports that while variable life products continue to be slow to recover from the financial crisis, new premium sales of variable universal life combination products increased 44% and policy count improved 88% in 2010.

The provisions of the Pension Protection Act of 2006 that affect the federal income tax treatment of qualified LTCI products became effective at the beginning of 2010, which is obviously a factor in the growth of combo products.

In his 2011 LTCI forecast for Life Insurance Selling, published last December, American Association for Long-Term Care Insurance chief Jesse Slome predicted combo products will continue to gain steady acceptance and growth. “Low interest rates projected to remain through 2011 will continue to hinder sales of annuity/LTC combos.

But watch out once interest rates start to climb again. When new money rates reach 6% to 7%, these products will take off, as consumers are willing to take a nominal reduction in yield for the added benefit of long-term care coverage.”

With details of the CLASS Act, which took effect Jan. 1, 2011, still very unclear (full rules and regulations are not due until October, and there is a very real possibility that the entire program could be scrapped), consumers and producers alike remain somewhat in a state of limbo regarding long-term care.

At least it is raising some much-needed consumer awareness of the need for LTCI. I hope producers will increase their efforts to promote the benefits of combo products to their clients and prospects and help more people take responsibility for the very real possibility they will need long-term care in the future, and they won’t want to be at the mercy of a government program.

 

Consumers continue to be receptive to combination products, which is good news for a senior population in serious need of long-term care insurance coverage.

LIMRA announced June 17 that new premium sales of individual life combo products — also called hybrid or linked benefit products — jumped an impressive 62% in 2010, reaching $1.2 billion. This comes on the heels of double-digit growth in 2009, as well.

Catherine Ho, a LIMRA research actuary, called the jump “remarkable,” particularly following the 2009 growth. “In addition to carriers boosting their marketing campaigns, consumers’ growing desire for an alternative to stand-alone long-term care insurance (LTCI) has driven sales of these products. For some buyers, combination products are a more affordable alternative to stand-alone LTCI.”

It’s still a small part of the overall market, but the growth is encouraging. New sales of combo products represent just 6% of the individual life insurance market based on new premium. But with more than 26,000 policies sold in 2010, the policy count of combination products increased 69% over 2009 sales results.

Universal life combo products continue to be the biggest segment of this market, not just in premium, but also in new policies and insurance sold. New premium rose 58% from 2009, representing 80% of the combo products market. LIMRA also reports that while variable life products continue to be slow to recover from the financial crisis, new premium sales of variable universal life combination products increased 44% and policy count improved 88% in 2010.

The provisions of the Pension Protection Act of 2006 that affect the federal income tax treatment of qualified LTCI products became effective at the beginning of 2010, which is obviously a factor in the growth of combo products.

In his 2011 LTCI forecast for Life Insurance Selling, published last December, American Association for Long-Term Care Insurance chief Jesse Slome predicted combo products will continue to gain steady acceptance and growth. “Low interest rates projected to remain through 2011 will continue to hinder sales of annuity/LTC combos.

But watch out once interest rates start to climb again. When new money rates reach 6% to 7%, these products will take off, as consumers are willing to take a nominal reduction in yield for the added benefit of long-term care coverage.”

With details of the CLASS Act, which took effect Jan. 1, 2011, still very unclear (full rules and regulations are not due until October, and there is a very real possibility that the entire program could be scrapped), consumers and producers alike remain somewhat in a state of limbo regarding long-term care.

At least it is raising some much-needed consumer awareness of the need for LTCI. I hope producers will increase their efforts to promote the benefits of combo products to their clients and prospects and help more people take responsibility for the very real possibility they will need long-term care in the future, and they won’t want to be at the mercy of a government program.

 

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