--The need for long-term care insurance is urgent, given the aging population, but purchases are declining.
--Technology now allows for streamlining the application process, as well as claims, and for spotting those who might be especially at risk and helping them avoid problems.
There are nearly 56 million Americans aged 65 and over, up from just over 40 million in 2010. This explosive growth of aging Baby Boomers means the U.S. is set to witness a demographic shift that it is ill-prepared for. Less than 10% of this demographic currently has a plan in place for long-term care insurance (LTCI) despite the widespread, legitimate concern among aging adults about outliving their retirement savings.
LTCI policies have experienced a steady decline in sales, with 2022 marking the lowest sales volume in over two decades. While perplexing on the surface – given the seriousness of the need – this trend is understandable when you consider heritage issues like inaccurate assumptions, which led to significant rate increases, lack of product innovation, agents and carriers dropping out of the market and overall consumer perception of the segment.
We can’t let this continue, though. To safeguard elderly individuals from financial insecurity during their retirement phase, the insurance sector needs to foster innovation that will ignite behavioral and buying changes in this category, as we have seen innovation drive growth in other verticals.
What Can Innovation Improve?
Let’s start at the beginning. Innovation can streamline the LTCI application process, which has traditionally involved physicals and lengthy procedures that frustrate consumers and result in high rejection rates.
The ability to accomplish this is here, right now. With the availability of improved risk selection and application processing techniques, insurance products available now can provide decisions within an hour. This streamlined approach – which we know consumers are demanding in every category – has led to better risk selection and significantly improved consumer experiences.
Innovation is also transforming the way insurance companies handle claims, making the process more efficient and precise. Automated initial claims routing streamlines the process, so claims can be swiftly directed to the appropriate department or personnel for evaluation and next steps. We must replace legacy systems with automation that saves time and resources, leading to faster response times and reducing the risk of claims getting lost or mishandled.
Venture capital recognizes the need and size of the opportunity, which is why recent VC investments in insurtech companies are upward of $11 billion. Where money flows, innovation follows. Happily, much of this money will focus on resolving known issues and friction points in the insurance landscape, leveraging machine learning to improve risk selection during the application process, generating better insights into what is driving morbidity and mortality.
If done properly, this innovative approach will lead to more accurate and stable pricing, making LTCI more affordable and accessible to middle-class consumers, a revolution that will help offset the years of negative news.
See also: Time for a 'Nudge' on Long-Term Care
Other opportunities exist in identifying potential policyholders who might require assistance and make a future claim for their health challenges. Those opportunities require insurers to analyze massive data sets mapped against population health metrics.
By using data analytics and predictive modeling, insurance carriers can reach out to these individuals, offering assistance, guidance and resources to address their needs before a crisis occurs. This don’t-wait-till-it’s-too-late approach can prevent or mitigate potential problems, helping policyholders maintain better health and quality of life.
For example, some insurance carriers are now incorporating innovative wellness programs into their pre-claim processes. These programs offer policyholders access to targeted, personalized health and wellness services like fitness programs, nutrition counseling, mental health support and preventive screenings. By encouraging and “gamifying” healthier lifestyles and early intervention, these insurers reduce the chances of claims arising from preventable health issues while also improving the customer experience overall, building stronger and deeper connections.
Messaging Matters, as in Any Other Industry.
As part of an innovative re-evaluation of the industry, insurance companies are seeking novel methods to engage and educate consumers about LTCI. They recognize that traditional approaches may not always effectively convey the significance of long-term care planning, given the complex nature of the subject matter. This includes applying the learnings from other categories delivering powerful content in the right way at that right time to the right audiences.
Educating consumers through various channels, such as interactive online platforms, mobile apps and personalized content, can address the LTIC gap. We can simplify complex insurance concepts, highlight the potential risks of not having long-term care coverage and demonstrate the value of investing in it early. Add to that a more sophisticated and accessible distribution strategy, and we have the ability to strengthen the LTCI market, making it more sustainable and responsive in the face of evolving healthcare needs.
Effective distribution channels are essential in creating awareness of the importance of LTIC and encouraging purchase. These channels are the bridge between insurance companies and potential policyholders, facilitating the dissemination of crucial information and guiding individuals through the purchasing process.
What Can States Do?
States can also play a pivotal role in driving innovation in the insurance industry overall, particularly with LTCI. Growing recognition of the challenges posed by an aging population and the rising costs of long-term care have prompted several states — including Washington, California and Minnesota — to implement their own state-run LTCI plans. These state-driven initiatives offer an opportunity for experimentation and innovation, and they are to be commended.
Control over the plan's structure and governance enables states to tailor policies that strike a balance between affordability for consumers and financial sustainability for the program. This Goldilocks solution allows them to offer in-demand, innovative features such as comprehensive home-based care options, technology-enabled services and early intervention wellness programs. The growth of the hospital-at-home category will inevitably become part of this.
Another benefit of localization is that states can analyze their unique demographic trends, healthcare usage patterns and long-term care service availability to design more effective and targeted LTCI offerings. They can use advanced data analytics to identify high-risk populations and design interventions to mitigate long-term care needs. Moreover, by working closely with insurers and long-term care providers, states can foster partnerships that encourage innovation and collaboration in the long-term care space.
Large, innovative cities can also take up this challenge for their residents and also their former employees, because their pension benefit systems are under massive economic pressure.
See also: Long-Term Care Insurance Must Evolve
Final Thoughts – Addressing the Elephant in the Room
As with many massive issues, solving the long-term care financing question has been difficult to address head-on, in all its manifold complexities. It has challenged agents and consumers but must be addressed to protect against this significant cost that is literally around the corner.
We should be encouraged by what we are seeing, as insurtech companies are introducing innovative solutions that can revolutionize the insurance industry and fill this gap. These efforts are driven by our social obligation to serve the needs of the growing elderly population, as well as the business opportunities that await. We can’t predict where innovation will emerge next, but we can be certain it will shape the future of both the insurance sector and the thriving insurtech industry in new ways. And not a moment too soon.