The news that John Hancock has hiked premiums of its long-term care insurance policies by 40% has roused the inner pessimist in agents, according to NU Online News Service on Thursday. While there has been no outcry, expectations are down for future sales. Peter Gelbwaks, president of Gelbwaks Executive Marketing Corp., Plantation, Fla., said in a statement that the hefty increase, coupled with John Hancock's decision to temporarily suspend group LTC policy sales, "doesn't bode well" for the LTC industry.
Marianne Harrison, president of John Hancock Long Term Care, a division of Manulife Financial Corp., in Toronto, said in another NU Online News Service article that the company is planning to file for rate increases in all states in September. Suspension of group LTC sales is to accommodate a review of claims in that market. The company's most recent claims study showed that claims had doubled since its 2006 study, and among policyholders 80 and over, had quadrupled.
While this "reinforce[ed] the value of the product to policyholders," said the company, it created a pricing issue, particularly since the lapse rate was lower than expected.
Existing policyholders will be offered alternative options to paying the 40% increase, including substituting 4% inflation coverage for 5%, or reducing daily or monthly benefit amounts.
Sales of policies are sure to take a hit, since the main reason people don't purchase LTC coverage is already focused on price. In a May survey (data published on Sept. 23) conducted by The Association for Long Term Care Insurance in Westlake Village, Calif., and Agent Media, a division of Summit Business Media in Erlanger, Ky., the parent of National Underwriter Life & Health,29% of LTC agents reported sales had dropped.
In May, agents were mostly optimistic about future sales, with 68% expecting an increase and 19% a substantial rise; now, however, that may change.