1. Indian Actuarial Profession Serving the Cause of Public Interest
28th India Fellowship Seminar
Topic: Long Term Care – An emerging need, learning from international markets and product road map
Guide Name: G R Surya Kumar
Presenters Name:
1. Nikhil Kamdar
2. Joanne Buckle
3. Ritu Kotnala
Date: November 10, 2017
Mumbai
Indian Actuarial Profession
Serving the Cause of Public Interest

2. Agenda Long Term Care – An emerging need
Learning from international markets
Product road map
Issues and concerns for actuarial profession

3. LTC What is Long Term care (LTC)? www.actuariesindia.org
Continuing Personal Care / Nursing Care
For those who are unable to look after themselves
Home / Day care center or in a state sponsored / care home setting
Not Particularly Concerned with Curing
Living Cost / Housing costs / personal care

4. Demographic Trend of population - Ageing
Older People, particularly the very old are the fastest growing population segment in the country.
While the Indian Population was expected to increase by 40% between 2000 and 2050 , the number of older people (aged 60+ ) is expected to increase by 354% during the same period.
Proportion of population over age 60 is expected to increase up to 18% by 2050 and over 33% by 2100

5. Long Term care – Increase in Demand
Increase in life expectancy
Migration of young people from rural India to Urban India
Emergence of Nuclear families
Changing role of women in families
Shifting disease profile for that require long term care
Poverty at old ages

6. Supply side factors influencing the need for LTC
Limited health care facilities
Government expenditure
Lack of Insurance Products
Lack of trained / specialized manpower

7. Long Term care – An Emerging need
Question :- Why has no Insurance company in India has come up with a long term care product so far?
Morbility projections are difficult to project over long term compared to Mortality.
Required trained and specialized Intermediaries to sell these products.
Medical advancements and Medical inflation
Significant work needs to be done in public and private hospitals to provide long term care.
Lack of regulations for health service providers.
Capital requirement for the product will be high compared to traditional medical Insurance products which are sold in India.
Still more focus on medical care rather then nursing care in India.
There are few day care centres in India.
Lack of trained nursing staff specialized in long term care.

8. Lessons learned from overseas LTC markets: UK
LTC is extremely expensive and almost no-one saves or buys insurance for LTC
partly because most people believe it is covered by the NHS(it is not)
partly because it is expensive and requires much cash to be put aside over a long time frame
There is a disincentive to save, because if you have few assets or income, the state will pay. In effect if you take out a policy, you are penalised and have to pay for what others get for free.
Two distinct products were sold historically (but never successful)
a) pre-funded care products. Indemnity to pay for care home, but otherwise similar to a pension (you pay a premium each month and upon ADL triggers, the plan pays out an annuity for as long as you need care.
b) Immediate needs annuity – you convert a pot of cash or housing equity into an annuity to cover care needs at the point of needing care.

9. Lessons learned from overseas LTC markets: UK
Prefunded policies
fair pricing was an issue, because the market was so small, the risk margins were huge (high levels of uncertainty) , which penalises first customers and potentially stunted the market
extremely difficult to keep within sensible loss ratio bands because of variability of experience
adding a margin on each assumption amounted to enormous overall margins and very expensive products
products did not always provide full indemnity for care home fees, which raised issues of whether products could be viewed as meeting customer needs
If people did not need care, policies were perceived as unfair because they gave nothing back.

10. Lessons learned from overseas LTC markets: UK
Immediate needs policies:
dealing with frail, elderly people and their relatives at point of need when they have limited options or time to examine the options.
annuity based on current interest rates and or/current house value, which means that customers who needed care in a depressed housing market or low interest environment were penalised.
very limited indemnity against future cost inflation (same issue as medical inflation, tends to be higher than CPI and hard to hedge against)
actuaries found it hard to design suitably simple products for this consumer group to understand, with suitable levels of risk protection
the needs of insurance companies and the public interest may conflict

11. Lessons learned from overseas LTC markets: US
9/8/2018
Lessons learned from overseas LTC markets: US
Risk
Insurer management of risk
Comments
LTC morbidity was higher than expected
Primary management lever is rate increases
Critical to continuously monitor
Morbidity trends positive (variable by company)
Persistency different from assumption
Primary reason for most rate increase filings
Current pricing lapse rates very low – therefore more limited downside risk
Mortality becoming more known
Interest Rate Risk
Hedging opportunities
Product design
Limited ability to receive rate increases based on interest rates different than expected (also depends on loss ratio)
Regulatory Risk
Limited ability to manage
Regulatory risk relative to rate increases is a major concern for many companies
Concern over limitation on product innovation and reserve and capital requirements

12. Lessons learned from overseas LTC markets: US
The SOA surveyed 29 companies who have exited the LTC market recently
Initially, had measured the market success by growth. Secondly, by profits. Caused issues with actuaries being under pressure to sign off prices lower than “technical “ prices to full growth.
All reasons for exiting: not hitting profit objectives (72%), concern about getting needed rate increases (62%), new assessment of the risk (52%), lack of confidence in ability to manage risk (48%), capital requirements (48%). Had actuaries communicated the full extent of risks and management understood those risks?. Potential miss-matches between pricing basis and underwriting practice?
62% of companies took rate increases before exiting, and 55% changed product design to build in margins.
Only 10% have not taken rate increases

13. Lessons learned from overseas LTC markets
Public interest considerations are important as well as technical actuarial pricing
equity and equality
intergenerational fairness
Almost all health insurance implies some level of cross subsidy from rich to poor and healthy to sick.
risk-rated premiums - the sick will pay more. If they are also poorer, they are unlikely to be able to afford premiums.
income–related premiums, the richer will pay more, but unless they pay a lot more, they will not be able to subsidise the poorer people.
Long term care insurance is especially difficult because of the interaction with social safety nets.
Actuaries must understand the social benefits available and ensure they are not inappropriately encouraging people to give away those safety nets.
Multidisciplinary teams to design and price.
The target market is critical to define
If the market is high income people, it will be viewed as a luxury good and can be risk-rated and lightly regulated.
If mass market and a substitute for government social benefits, LTC insurance would need to be heavily regulated from a pricing perspective and unlikely to be risk-rated. If participation is voluntary, by buying LTC insurance, you may be cutting yourself off from state benefits (where they exist), which creates a disincentive and raises questions about appropriateness of sales to people on the borderline of means-tested benefits.

14. Preserve independence & autonomy
Product Road Map
Residence
Assistance with ADLs
Preserve independence & autonomy
Medical & nursing care
Affordability
Needs

15. Existing work by Government of India
RASHTRIYA VARISHTA JAN SWASTHYA YOJANA (RVJSY)
Special initiatives to improve the quality of life of the population aged 75 years or older
National Programme for Health Care for the Elderly (NPHCE)
Provide accessible, affordable, and high-quality long-term, comprehensive and dedicated care services to an ageing population
Create a new “architecture” for ageing
Build an enabling environment for “a society for all ages”
Promote the concept of active and healthy ageing in the health system of India
National Policy on Older Persons (NPOP)
Recommended an inflation-linked pension for all older persons living below the poverty line.
Maintenance and Welfare of Parents and Senior Citizens Act
Defined the responsibilities of the family and the State in providing care for older persons

16. Government Society Private Players
Collaborative actions required
Government
Society
Private Players

17. Role of the Government Policy and regulatory initiatives
Financing initiatives
Delivery initiatives

18. Role of the health insurers
Creating long-term, dedicated insurance products
Innovative insurance offerings
Cater to the differentiated needs
Micro insurance products for low-income groups
Products that include flexible payment and coverage components
Innovative mechanisms to share risk
Co-payment of costs between insurers and other entities
Evaluating means to cover certain pre-existing conditions

19. Improve three aspects of healthcare
Role of Private healthcare delivery players
Improve three aspects of healthcare
Availability
Cost
Quality

20. Quantitative analysis
Role of Actuaries
Quantitative analysis
Consider relationship between benefit design and cost
Develop relevant data/information
Identify cost-saving approaches
Evaluate uncertainty and understanding of risks
Benefit design
Help minimize moral hazard and anti-selection
Contribute to policy discussions

21. Continuous assessment required
Coverage
Benefit design
Affordability
Appropriateness & quality
Risk & cost management
Sustainability
Unintended consequences

22. Monitoring & product governance
Issues and concerns for actuarial profession
Meeting all needs of target market?
Tackling intergenerational fairness?
Public interest and interaction with state benefits?
Simplicity with limited “small print”
Pricing basis – risk rated or income rated? Willingness to pay?
Product design
Need to be sold through specialized intermediaries only.
Ensuring the target market understands the product and any limitations
Distribution & sales
Frequency of product review with limited experience
Testing of customer needs and ongoing target market analysis.
What customer feedback is feasible?
Ensuring a full range of management information for decision-making
Monitoring & product governance

23. Citations
SDD-SPPS project working papers series: long-term care for older persons in Asia and the pacific
Ensuring care for the golden years – Way forward for India
Global Perspectives on Long-Term Care by IAHHS

24. Questions?