Over the last two decades the long-term care (LTC) insurance market has gone from having more than 100 carriers offering stand-alone LTC policies to fewer than a dozen. This mass departure from the market has resulted in many runoff blocks of LTC policies because of its long-tail nature. These blocks present several business risks in addition to the inherent insurance risks for companies that have retained their existing policies.
For example, key person risk can develop as the product-specific knowledge base becomes concentrated to a few people or lost because of retirement or turnover. Estimation risk and process risk can also develop if a company’s staff lacks either the capacity or knowledge base to document and vet results.
Outsourcing can help reduce the risks involved in managing a closed block of LTC business. Third-party outsourcing providers have historically been a source of expertise for many companies. The rise of cloud computing now allows outsourcing providers to also provide the scale, efficiency, and accessibility to address the business risks of runoff LTC business. Milliman’s Jeff Anderson and Van Beach offer more perspective in their article “Challenges of runoff LTC and outsourcing to mitigate risk.”