By Mark Miller
CHICAGO Feb 14 The gender gap is about to get a
little wider as the formerly egalitarian long-term care
insurance market starts charging higher prices for women.
While life insurance has long been priced by sex, companies
that provide long-term care insurance (LTCI), mainly used to
cover healthcare expenses in old age or for severe illness, have
long avoided it. But for the first time this year, they will
introduce gender-based pricing, starting with policies from
Genworth Financial Inc, the nation's largest seller.
The aim is to reflect actuarial realities - women live
longer and prepare ahead more for their futures by buying
policies. Genworth says two-thirds of its LTCI claim payouts go
to female customers, and overall, women account for 57 percent
of all policy sales in 2011, according to data from LIMRA, the
insurance research and consulting group.
Genworth will introduce gender-specific policy pricing by
this spring, if the plan passes regulatory hurdles. That will
boost the cost of new policies for women by 20 to 40 percent,
depending on the applicant's age and benefit package, according
to the American Association for Long-Term Care Insurance
A Genworth spokesman stresses that the pricing will be
applied only for women applying on their own - 10 percent of its
policy applicants. The company will continue to offer lower
rates to married couples who purchase joint coverage, and the
changes won't affect current policyholders.
Industry experts expect gender-based pricing will be adopted
by other carriers before the end of this year - both for
individuals and married couples.
"Three or four other companies are looking at gender based
rates, and already have their regulatory filings ready to go,"
says Dawn Helwig, a principal with Milliman, an actuarial
consulting firm that works with the LTC insurance industry.
STRUGGLING TO KEEP UP
Gender-based pricing is the latest stopgap measure for an
industry that already is struggling. The ultra-low interest rate
environment has made it difficult for insurance companies to
earn enough on their fixed income portfolios to fund benefits.
Another challenge for insurance companies, ironically, is
customer loyalty. Only about 3 percent of policyholders allow
their coverage to lapse. It's a smart consumer move to hold onto
policies, but it is costly for carriers, who ultimately wind up
paying more claims.
The result has already been a wave of double-digit rate
hikes on existing customers, and more to come. "In general,
prices have and will continue to increase," says Jesse Slome,
AALTCI's executive director.
For new customers, policies in 2012 cost anywhere from 6 to
17 percent more than in 2011, according to AALTCI - and they are
30 to 50 percent higher than five years ago. Competition also
has been reduced as a long list of major insurance companies
have stopped writing new individual policies, including
Prudential Financial Inc, Metlife Inc and
Allianz Finance Corp.
Gender pricing is just the latest sign that our approach to
long-term care isn't working. The private market is limping
along as a small niche business - overall penetration remains
less than 5 percent of the total possible market, according to
The stressed Medicaid system is the nation's largest
insurer, which puts stress on federal and state budgets.
Outside of that, family members are the most common source of
What can women do to get the lowest rates possible in this
1. Get started now
If you have been thinking of buying LTCI, this would be a
great time to get going. Genworth is applying now for the
gender-based rate increases to individual state insurance
regulators. The rate increases are expected to be approved over
the course of the spring and summer. (If you live in Montana or
Colorado, you will not be affected, as both of those states
require unisex rates.)
2. Apply as a couple
If you are married, applying as a couple will keep your
costs down. Genworth and the rest of the industry apply
discounts for couples who apply for coverage together. LIMRA
says the average annual industry premium for married individuals
in 2011 was $2,131, while single buyers' policies averaged
3. Shop around
LTCI rates can vary considerably from company to company,
and some are tightening up their underwriting to require
applicants to under more rigorous pre-approval medical tests to
determine pre-existing conditions.
Rates also vary from state to state - and not all insurers
offer policies in all states. "If you have residences in
multiple states, work with an agent licensed in both states and
be sure to sign the application in the particular state or you
risk being ineligible for benefits," says Slome.
4. Buy what you can afford
Three years of coverage is adequate for most people who use
benefits, with a 90- to 180-day elimination period (the waiting
period before coverage kicks in). But more than half of policies
sold in 2011 provided between two to four years of care
coverage, LIMRA data shows.
5. Adjust the inflation protection
Most buyers in 2011 (86 percent) purchased some form of
inflation protection, LIMRA says. It's a critical feature, but
also a big driver of price. The most popular inflation rider is
an automatic 5 percent annual increase. But the cost of
private-room nursing home care rose at a 4.3 percent average
annual growth rate from 2007-2012, (averaging $81,030 last
year), according to the 2012 Genworth/Carescout Cost of Care
Some experts think 3 percent provides adequate inflation
protection - and some protection is better than none at all.
"Too many people take an all-or-nothing approach and price
themselves out of the market," says Slome. "Don't base what you
buy now on what you did before - its not 2007 anymore."