Despite the aging American population and continued growth in long-term care (LTC) costs, sales of LTC insurance continue to lag behind expectations. Sales plummeted from 2000 to 2009, and remain low despite a slight, recent uptick. There are several reasons for this trend. In the early years of LTC insurance, insurance companies seriously underestimated lifetime benefit costs and were forced to increase rates. Consumers are also reluctant to purchase LTC insurance when they are young and healthy enough to afford the premiums. These challenges have caused some distributors to refocus their offerings.

However, there is at least one area of LTC insurance that is experiencing strong growth: combination products that pair LTC with an annuity or life insurance. Individual life combination products experienced double-digit growth from 2009 to 2011.Combination products represented total new premiums of $2.2 billion in 2011, with over 72,000 policies sold. Single premium products accounted for 61 percent of the market in 2011 and experienced 46 percent growth based on policies sold.

What is driving interest in these products, and are they a viable solution to the slow growth of the LTC insurance market?

This article was published in the September 2012 issue of The Geneva Association's The Four Pillars Newsletter.