A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. Consumer Response to Cash

10/14/2011

Most carriers offering a cashbenefit indicated that insureds articulate a preference for a cash benefit because of the flexibility of the offer. However, whether they elect such an option or not depends upon how competitively it is priced. In one insurer’s experience, initial “take up” of their cash rider (month-to-month option to elect 100% cash) was high -- about 40%. But when the product was re-rated at about 28% higher premium, take up dropped significantly to about 3%. That was the motivation for this insurer to move to a “built-in” premium neutral approach to cash.

Aside from this anecdotal information, data on the extent to which insureds elect a cash benefit -- either as an optional rider -- or to use on a month-by-month basis is not known. Similarly, information is not available on how insuredstypically use cash. Aside from a few company-specific studies over the year, most insurers do not track how the cash benefit is used.

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