A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. B. Underwriting Declination Rates by Age

10/14/2011

In 2009, underwriting rejection rates across the industry were at 19.4%. As shown in Figure 2 below, declination rates are highly sensitive to age. This data is based on a recently completed survey of 21 LTC insurance companies representing the vast majority of sales in 2009. For applicants under age 45, declination rates are below 10% whereas for those over age 80, rates increase to slightly more than two in five or 44%. This is not surprising given that functional and cognitive decline -- and associated need for LTC services -- is related to age.


FIGURE 2: Underwriting Declination Rates by Age

Bar Chart: Age less than 45 (7%); Age 45-49 (9%); Age 50-59 (12%); Age 60-64 (16%); Age 65-69 (22%); Age 70-74 (27%); Age 75-79 (32%); Age 80+ (44%).

Source: Results of the Long-Term Care Underwriting Survey for the Individual Market in 2009. LifePlans, Inc. Waltham, MA. November, 2010.

Note: Data weighted to represent market share of participating companies.


If we compare the age profile of individuals unable to purchase insurance due to health reasons with those who were issued policies during the same period, we find that the former tend to be older. In fact, the average age of individuals declined for coverage in the underwriting process in 2009 was 64 years whereas the average age of new purchasers was 57 years.


FIGURE 3: New Policy Issues and Declinations by Age

Bar Chart: Age less than 60 -- Applicants unable to Purchase Policy (28%), 2009 New Policies (58%); Age 60-69 -- Applicants unable to Purchase Policy (48%), 2009 New Policies (36%); Age 70+ -- Applicants unable to Purchase Policy (24%), 2009 New Policies (6%).

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