ACTUARIAL

Futuristic Scenarios for LTCI

Session 25: February 28, 2006

Session Producer:John Timmerberg, President

Timmerberg & Associates, Inc.

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PANEL• Jim Glickman, President and CEO,

LifeCare Assurance Company• Greg Gurlik, Director – LTC

Product Development, Northwestern Mutual

• John Timmerberg, President, Timmerberg & Associates, Inc.

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Futuristic Scenarios For LTCI

• In this Open Forum session, panel members will briefly present and debate a Futuristic Scenario. After each Scenario, we will look to audience members for discussion and debate.

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Futuristic Scenarios For LTCI

• Over 50% of the session will be devoted to audience participation.

• We will cover four or five fully developed and distinct scenarios.

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Futuristic Scenarios For LTCI

• We will discuss and debate future developments involving the following topics:

– Economic developments– Product innovations– Changes in the regulatory environment– Senior health and wealth– Changes to government programs– Care delivery

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Scenario #1

• Federal Government Action– increases employment for the over-65

• Global Competition - Price Stability– Very low interest rates– Strong growth in asset values

• Size of LTCI market is expanded– Diverse collection of niche markets

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Scenario #1 - continued

• Product Innovations– Interest sensitive product– Product structured as a “put” on planned

asset accumulation– Product with a variable elimination period,

based upon 50% of home equity value

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Scenario #2

• LTCI through annuities

• Inexpensive home testing for genetic indicators

• Liberalized underwriting for employer groups

• LTCI through expanded 401(k) programs

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Scenario #2 - continued

• Medical advances impact underwriting tools and placement rates

• Very liberal underwriting of products written through 401(k)– Rapid expansion of market– Leads to poor early claims experience

• Federal Government action– LTCI is “mandatory” – Vouchers program initiated for Medicaid eligible

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Scenario #3

• LTC piece of Medicaid is “Federalized”

• Higher interest rates – Lower premium– Larger market

• RBC and ratings agencies

• Aggressive entry of new companies

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Scenario #3 - continued

• Online processes– Online medical records leads to kitchen

table underwriting decisions– 50% sold through internet– Competitive pricing; reinsurers

• Competitive products leads to “day of reckoning” for several insurers

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Scenario #4

• Substantial premium rate increases continue

• Industry looks for “Exceptional” rate increases– Denied

• Reserves: mandated tables for claim costs and claim termination rates

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Scenario #4 - continued

• Stories of impoverishment– Pressure to “solve” LTCI crisis

• Medicare expanded to first 180 days– Nationwide Partnership program; 3 yrs

• Medicare Part L is introduced– 80/20 split in costs– Four standardized products

• Mainstream product and Market is greatly expanded