We continue this month to reflect back upon the past year, highlighting some of the most important topics and trends that made headlines over the year. This week, we also look ahead at just a few of the things we’re watching for 2019.
Continued Growth of the Life-LTC Combination Market: According to LIMRA research, the Life-LTC combination market has grown to more than a $4 billion market over the past 10 years. Long term care (LTC) is a growing concern in the U.S., with half of people turning 65 today requiring some form of LTC support during their lives. With the average annual cost for nursing home care close to $100,000 per year, few people have the resources to pay for this care and even fewer have insurance to cover these costs.
To combat these costs, however, consumers aren’t turning to traditional LTC products. Instead, they’re seeking out combination products that can address multiple financial concerns with a single solution. LIMRA reports that almost 3 in 10 (28 percent) would consider a combination product because purchasing two policies separately would be more expensive. Further, the fear they’ll have to “use it or lose it” is also a concern. Understanding the competing financial concerns of today’s consumers, many insurance carriers have added to their product offerings, and we see this trend continuing. DBS offers a full selection of options and product types from our carriers.
Principles-Based Reserving Creates Fire Sale: Beginning in 2020, under the new principles-based reserving (PBR) framework established by the National Association of Insurance Commissioners (NAIC), life insurance carriers will have to significantly change how they estimate reserves for most types of life insurance contracts. Though the use of the approach is optional now, it will be mandatory in 2020, which means that 2019 is expected to be “the year of the sale” with many carriers expected to announce pricing changes.
We’ve already reported on the repricing taking place with several of our carriers, and we’ve even seen Legal & General introduce a 35- and 40-year term product. You’ll also likely see changes with No Lapse UL products in 2019 until PBR pricing is mandated in 2020.
What does this mean for you? Much of the repricing will be temporary, so you may want to take advantage of the pricing and product offerings while you can. Watch for more of our carriers to announce changes as the deadline date gets closer and closer, and continue to check our Carrier News page, where we keep you informed on all the latest carrier changes and developments.
Continued Interest Surrounding Tax Reform: The year opened with comprehensive tax reform for individuals and businesses which created numerous changes and opportunities, particularly for advisors with small-business clients.
We followed the course of events closely and reported on how the changes would affect both you and your clients. DBS Advanced Marketing Attorney Terri Getman, J.D, CLU, ChFC, RICP, AEP (Distinguished) reported earlier this fall on one of the biggest changes affecting financial advisors directly: the new 20% Qualified Business Income (QBI) deduction (also known as the 199A deduction). It presents unique opportunities for financial advisors because the deduction applies to qualified business income from all business entity structures except C corporations. Thus, a financial advisor conducting business as a sole proprietorship may reap the benefit of the new deduction. Looking ahead, life insurance will continue to be an important part of the planning process particularly for businesses as the full effect of the legislation is realized.