Karl Anderson

Industry Insights

Milliman study reveals favorable results for life/annuity and LTC combination products

Milliman, Inc. announces the results of a first-of-its-kind, industry-wide study that examines insurers' experience with combination products – those that couple life or annuity policies with Long-Term Care (LTC) or Chronic Illness (CI) riders.

The study, includes data from 11 insurers (ten using life insurance-based plans and one using an annuity chassis) focused primarily on incidence rates, lapse / surrender rates, and mortality rates. Policies with LTC accelerated death benefit (ADB) riders and no extension of benefit (EOB) riders comprised about 60% of the exposures, while policies with CI ADB riders represented about 25% (none of which used the discounted death benefit approach); the remaining 15% of exposures were based on policies with both ADB and EOB LTC riders. All policies in the study accelerated the death benefit on a dollar-for-dollar basis.

Key findings of the study include:

  • Overall, incidence is significantly better than expected. The actual-to-expected (A:E) is very low when measured against stand-alone LTC assumptions and also lower than when measured against combination product assumptions.

  • Plans with extension of benefits have relatively higher incidence than acceleration of death benefit only plans, but results are still favorable.

  • Mortality results were somewhat lower than industry experience on stand-alone fully underwritten life products, despite the less extensive underwriting done on some of these combination products.

  • Lapse rates by count and amount were generally between 2% to 3% for ADB-only policies. Policies with ADB and EOB coverage were slightly lower, but still higher than seen in the stand-alone LTC market.

  • Another major factor affecting lapses overall is the type of base plan. Some differences between universal life, whole life, indexed universal life and variable universal life may be partly explained by equity market performance during the exposure period.

Given the length of time for claim termination experience to develop, the study includes a few early indications of claim termination experience, but does not provide a full and detailed analysis. Milliman plans to update this study again in 2019. Detailed study results are available for purchase from Milliman for a fee

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Hybrid Life-LTC, Chronic IllnessKarl AndersonCombination products, Milliman, Hybrid Life-LTC