Sharp increase driven by current and proposed legislation
WINDSOR, Conn., Aug. 9, 2022 — Total new premium for individual life combination products increased 22% to $4.3 billion, compared with prior year results, and down slightly from the $4.8 billion in premium generated in 2019, according to LIMRA’s 2021 U.S. Individual Life Combination Products Annual Review. Combination products represented 20% of total life insurance premium in 2021.
LIMRA research shows there were nearly 559,000 policies sold in 2021, up 37% compared with 2020 results.
“The pandemic led to the steepest one-year decline (2020) of life combination product sales recorded since LIMRA began tracking this data in 2010,” Karen Terry, assistant vice president, Insurance Research, LIMRA. “Sales rebounded significantly in 2021 due to the introduction of the Washington Cares Act, which propelled sales in long-term care (LTC) extension and acceleration sales.”
The act, signed into law in 2019, established a state-sponsored long-term care benefit program funded by a 0.58 percent payroll tax, which was set to begin on Jan. 1, 2022. Workers in the state could apply for an exemption from the payroll tax if they owned private LTC coverage on or before Nov. 1, 2021.
Life combination products provide life insurance coverage with long-term care or chronic illness coverage, an attractive value proposition to consumers, according to LIMRA consumer research.
In contrast to 2020, where sales were down slightly, recurring premium sales have shown an overwhelming amount of growth (39% increase in policies). While single-premium policies continue to decline, down 4%, the drop is not as drastic as it was in 2020. Recurring premium products increased their share of the combination product policy market by one percentage point over 2021, now representing 97% of all new life combination policies issued.
According to LIMRA research, 1 in 4 consumers are extremely or very likely to consider a life combination product when shopping for life insurance. The top reasons they give for considering life combination products are:
- The ability to choose whether they receive care at home or in a facility
- Coverage for temporary illnesses/conditions
- The ability to use benefits to pay for home modifications or equipment that helps them stay at home
- Adult day care coverage
On a product level, whole life combination product sales gained 6 percentage points of policy market share in 2021 after decreasing 2 percentage points in 2020.
Indexed universal life (IUL) and term life both dropped 5 points of policy market share respectively, shifting mostly towards whole life products. IUL continues to hold the largest share of any product within the premium market share, growing 2 percentage points.
Chronic illness (CI) acceleration riders, which allow you to tap into your life insurance policy's death benefit while you're still living if you're diagnosed with a qualifying health issue, continued to dominate the acceleration rider market in 2021. CI acceleration riders gained 3 percentage points of premium market share to extend their lead over long-term care extension-of-benefit products.
Life policies with long-term care acceleration riders captured an additional 7 percentage points of policy market share, while also gaining some ground in premium market share as well. These products stood out in a year of significant policy growth, increasing 75% from 2020.
“Our 2022 Insurance Barometer study shows 4 in 10 consumers are very concerned about how they will pay for long-term care services,” notes Terry. “Combination products are an affordable, attractive solution for people who want to have options regarding the care they receive, particularly if they wish to remain in their homes.”
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