Prudential latest to rev up hybrid LTC product

Like automobiles, the future of long-term-care insurance may lie in hybrids. Indeed, Prudential Financial Inc. today confirmed that it is working on a hybrid life insurance and long-term-care product. The insurer may roll out the combined product as early as the first half of next year. “Some things have occurred in the last three to six months that have led us to think if traditional long-term-care insurance is such a difficult product to manage, then maybe we should look at alternative ways of delivering the protection to American consumers,” said Malcolm A. Cheung, vice president and actuary for LTC product and risk management at Prudential. “There's been more interest in the hybrid, prompted by industry developments,” he added. Those developments include skyrocketing medical costs and an increasing number of claims. Last month, MetLife Inc. said it would cease selling traditional LTC insurance due to the ‘financial challenges' of the business. At the time, management at the nation's largest life insurer said the company would explore a hybrid offering. Expect more to follow suit. The combination of life insurance or an annuity with LTC benefits is a much easier risk for insurers to cover, as the client's dollars are used first to pay for long-term-care needs. Limits are also lower, which makes the hybrid cheaper than a traditional policy. Lincoln National Corp. and Genworth Financial Inc. are among the companies that offer LTC hybrids. Mr. Cheung said that Prudential, which is still mulling its LTC options, will take a different tactic in releasing a hybrid. Rather than developing a single policy that covers two risks and runs into problems with slow state approval, he said, it may make sense to integrate the marketing, underwriting and administration of a life insurance contract and an LTC contract. That way, the insurer is working with — and selling — two contracts that are already approved. Customers, on the other hand, will feel like they're purchasing a single product. “This is a radical departure from traditional long-term-care plans,” Mr. Cheung said.