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The market for retirement insurance products is slowly and silently disappearing. From annuities to long-term-care insurance to employer-provided health insurance, insurance products are becoming both less available and less popular. Older Americans should be worried as insurance markets don’t work as well when they thin out according to the WSJ.
There is some evidence this is happening in the market for long-term-care insurance. One study showed that, on average, a 65-year old man purchasing long-term-care insurance policies can expect to receive only about half his premiums back in benefits. Another study showed that people at-risk for genetic disorders were five times more likely to buy long-term care insurance. Expensive insurance coupled with higher take-up for at risk policyholders suggests that adverse selection may be at play. The second problem with the thinning of private insurance markets is that it places the bulk of the retirement security burden on public plans. As our nation’s public debt rapidly approaches unsustainable levels, reform of large-scale programs may become increasingly attractive to policymakers. A paring back of Social Security and Medicare would severely upend American retirement, but would be even more problematic
