Long Term Care (LTC) insurance is a complex product that’s challenging for carriers on both the product and underwriting side. It’s hard to find a model example in a particular market because countries have their own social frameworks and LTC insurance has evolved differently around the world as result.

What is clear, however, is that demographic and societal change in markets everywhere is underlining the need to protect against care costs that surpass a person’s financial means.

While LTC represents a clear opportunity for insurance companies to expand their products’ ranges and to embrace new business opportunities, it’s still necessary to do the homework. In most markets, the commercial success of private LTC insurance products has fallen short of expectations.

One of the biggest challenges around LTC underwriting is the large number of possible causes for care need and the heterogeneity of the causes. In contrast to life insurance, where death is the only cause of claims, an LTC claim can be caused by hundreds of single types of injuries or disorders - or any combination of an even bigger number of injuries or disorders.

Duration of care and determining an adequate loading is another issue. The duration can vary significantly between claims triggers. It can make minor diseases that do not have a significant effect on life expectancy more of a concern to the underwriter than severe diseases with shorter survival prognosis.

A challenge linked with LTC underwriting is the growing range of entry ages. In the past, LTC cover was sold to applicants between the ages of around 50 to 75. Nowadays, companies in some markets are trying to extend their potential customer groups and selling to younger people.

But the motivation to buy LTC cover can differ significantly across the age ranges - a fact that underwriters should bear in mind while looking at individual cases in order to reliably identify anti-selective insurance purchase.

All these trends together add to the complexity of compiling application forms for LTC underwriting. The forms should contain questions concerning pre-existing medical conditions, from functional to cognitive impairments, to all health conditions with the potential to develop into a need for long term care.

Questions on dangerous pursuits and occupations are relevant as well, especially if addressing younger people. But they can also be important with older LTC applicants because these days they are still active in sports and working longer.

To read more on how Long Term Care insurance works in different markets, and for an analysis of the essential underwriting challenges involved, check out our recent article on the topic.