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Considerations in Developing Combination Long Term Care products

Background and Purpose

Combination Long Term Care life insurance (Combo LTC) products have become one of the primary vehicles of providing LTC coverage to consumers, providing a major impact on their retirement financials and their ability to afford appropriate LTC services. There has also been recent innovation and interest in providing LTC benefits on annuities as well as launching Combo LTC in the voluntary employee benefit space. The importance and interest in these products are rising because of their expected high growth and increase in demand. The purpose of this research is to understand the market opportunity of this product line and the considerations that need to be taken to develop a successful product and to keep the product sustainable. The products in scope of this research are products with LTC benefits that qualify under IRC 7702B.

Market trends on these products have been difficult to track because of the variety of designs and variety of target markets. This research can help define the market opportunity, which in turn can address its feasibility given the high investment often needed to build the product.

This research will also address the question of sustainability of these products. How well insulated are Combo LTC products from the types of pressure the stand-alone LTC industry has faced over the past 10 to 20 years? What are the considerations that need to be taken to help the sustainability of the product solution in product design, in pricing, in underwriting and in claims processing as well as in inforce monitoring and management.

A large part of the feasibility of developing this type of product is the reserving requirements. The research findings can help actuaries handle the complexities of principles- based reserving and how they can be managed.

Research Objective

The Society of Actuaries Research Institute is seeking researchers to study market trends and analyze the risk profile of Combo LTC products, across both life insurance and annuities, and including those in the voluntary employee benefit space. Using industry knowledge, literature review, survey, modeling and/or original research, the researchers will perform a study to address the following questions. The proposal can focus on specified segments with general treatment of other segments.

  • Market Trends and Product Design

  • What is the New Business size of the market in each market segment as of 2023-2025: individual life, annuity and employee benefit?

  • What are the market trends in this product line, including product design and underwriting elements targeted for specific segments of distribution and their clients?

  • Combo LTC design trends to determine are: (a) benefit type (reimbursement or indemnity. And if indemnity, what triggers benefit payment) (b) relationship of LTC benefits to base product benefits (acceleration vs extension of benefits) (c) rate basis (whether non-cancellable or guaranteed renewable).

  • Base product design trends to study are: (a) life chassis: Whole Life, or Universal Life (UL), Indexed UL or Variable UL, others; and if any of the forms of UL. whether there is a lifetime secondary guarantee (b) annuity chassis and (c) Employee benefits chassis.

  • Are there any other regulatory hurdles or considerations that may influence future product designs and reserve practices?

  • Assumptions and Risk Analysis

  • What are critical product design elements that support risk sharing and have protective value to the company?

  • What is the range of assumptions being used for the pricing of these products? How are they related to the design (including acceleration only and with extension of benefits), marketing, underwriting and claims processes used by carriers? How are these assumptions developed and how do they relate to stand-alone LTC assumptions?

  • How much testing is performed to gauge the sensitivity to the assumptions? Is there more emphasis on certain assumptions like lapse that had hurt companies on stand-alone LTC?

  • How important is the yield and asset availability to the sustainability of the product? How critical is ALM (asset liability management) and hedging to the risk management? What are the practices in the industry to support the yield pricing assumptions?

  • How is experience unfolding compared to traditional LTC experience? Are there any notable similarities or differences? If so, what are the key drivers for differences? What trends are expected to emerge in the future as in-force policyholders age?

  • What does the tail risk look like for these products? What are key considerations related to the quantification of the tail risk and development of management practices related to the risk? How might late age/duration experience on Combo LTC products differ from experience on more recently issued business?

  • Inforce Management

  • What in-force management practices are being used, especially on assumptions known to be sensitive? What specific metrics are used to monitor the sensitive assumptions?

  • What mitigation actions are companies taking to lessen the risks? How widely are pro-active tools like wellness benefits and customer engagement being used? Are there indications of their effectiveness?

  • Valuation

  • What are the current practices and learnings on VM-20 with these combination life/LTC products? Topics to include are on the determination and testing of assumption margins, credibility factors (including the impact of the use of reinsurer data), how natural offset of risks inherent in the product is reflected, inflation (expenses but also including inflation that could impact claim utilization), amongst other considerations.

  • Are there VM-20 elements that are particularly sensitive to product design and/or to assumptions that should be considered in product development and management?

  • What are the considerations in reserving for combination annuity/LTC products?

Proposal Requirements

To facilitate the evaluation of proposals, the following information should be submitted:

  • Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.

  • An outline of the approach to be used (e.g. literature search, model, etc.), emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted, and possible limitations of the analysis.

  • A description of the expected deliverables and any supporting data, tools or other resources to be used.

  • Cost estimates for the research, including computer time, salaries, report preparation, material costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.

As a guide for developing project budgets, please review the Historical Project Cost Guide (see Appendix).

Please note that as a policy, the SOA Research Institute generally does not provide funding to cover academic institution overhead expenses.

  • A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions. The SOA is interested in completing this project in a timely manner. Suggestions in the proposal for ensuring timely delivery, such as fee adjustments, are encouraged.

  • Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.

Selection Process

The SOA will appoint a Project Oversight Group (POG) to oversee the project. The POG is responsible for recommending to the Section Research Committee the proposal to be funded, if any. Input from other knowledgeable individuals also may be sought, but the Section Research Committee will make the final recommendation, subject to Society of Actuaries Research Institute (SOA) leadership approval. An SOA staff research actuary will provide staff actuarial support.

Questions

Any questions regarding this RFP should be directed to Research-ML@soa.org with the subject line: Considerations in Developing Combination Long Term Care products.

Notification of Intent to Submit Proposal

If you intend to submit a proposal, please email written notification by August 22, 2025 to Research-ML@soa.org with the subject line: Considerations in Developing Combination Long Term Care products.

Submission of Proposal

Please email your proposal to Research-ML@soa.org with the subject line: Considerations in Developing Combination Long Term Care products; proposals must be received no later than September 5, 2025.

Conditions

The selection of a proposal is conditioned upon and not considered final until a Letter of Agreement is executed by both the Society of Actuaries Research Institute and the researcher.

The Society of Actuaries Research Institute reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available. The Society of Actuaries Research Institute also reserves the right to redirect the project as is deemed advisable.

The Society of Actuaries Research Institute plans to hold the copyright to the research and to publish the results with appropriate credit given to the researcher(s).

The Society of Actuaries Research Institute may choose to seek public exposure or media attention for the research. By submitting a proposal, you agree to cooperate with the Society of Actuaries in publicizing or promoting the research and responding to media requests.

The Society of Actuaries may also choose to market and promote the research to members, candidates and other interested parties. You agree to perform promotional communication requested by the Society of Actuaries, which may include, but is not limited to, leading a webcast on the research, presenting the research at an SOA meeting, and/or writing an article on the research for an SOA newsletter.

Conflict of Interest

You agree to disclose any of your material business, financial and organizational interests and affiliations which are or may be construed to be reasonably related to the interest, activities and programs of the Society of Actuaries or the Society of Actuaries Research Institute.

Appendix

The cost ranges below are intended as a guide for budgeting project costs for proposals in response to SOA Research Institute Request for Proposals (RFP). Please note these figures span the 33rd to 66th percentiles for all projects as well as projects that involve a specific approach (lit review, survey, etc.). They are based on historical costs over several recent years. Expected costs for some RFPs may fall outside these ranges depending on the nature of the work and resources required for completion.

All Contracted Projects

This category includes all contracted projects that the Institute has undertaken within the last several years. The 33rd – 66th percentile project costs range is $25,000 – $50,000.

Literature Reviews

This category includes projects that involved only a literature review or the cost for the portion of a larger project that included a literature review. The 33rd – 66th percentile project costs range is $15,000 – $20,000.

Surveys

This category includes all projects that had a survey as their primary component. The 33rd-66th percentile project costs range is $28,000 – $55,000.