Did you know that sales in the Short Term Care insurance market have grown by 240% over the past five years? And that new sales are expected to grow another 55% over the next five years?
Short Term Care plans are supplemental health insurance products that are designed to help individuals cover the cost of care following a serious injury or illness. These products are structured to pay a daily benefit amount if the insured needs to stay in a nursing facility until they are well enough to return home on their own. Short Term Care plans can also include Home Health Care service benefits which can be used if the insured is able to finish their recovery in their own home.
Consumers can customize their Short Term Care plan to select from a wide range of benefit options.
Companies have been drawn to Short Term Care products due to their balance between streamlined administration (simplified underwriting and a fixed indemnity benefit), reasonable profitability expectations (50-60% minimum loss ratio requirements), and attractiveness to a growing market (average issue age of 65).
As noted above, several carriers have been successful growing their Short Term Care products over the past five years. This growth is attributable to both an increase in consumer awareness and growth in the target market (ages 50-79). Telos Actuarial projects that the Short Term Care target market will continue to grow and surpass 111 million people in five years. The following chart presents two possible future market scenarios over the next ten years.
The conservative scenario extends the gradually increasing penetration rate trend seen in recent years, while the optimistic scenario assumes the penetration rate increase will continue to accelerate at a more rapid rate over the coming years.