Another year has passed and while much has changed in the long term care insurance industry, much has stayed the same. You could say 2002 was another bad news/good news year.
First, the bad news. LTC insurance carriers are beginning to feel the impact of some of the industrys collective past deeds. For example, some carriers are taking sizable rate increases based on poor actuarial assumptions of morbidity and persistency. And, in some cases, this has been accompanied by shoddy past underwriting, causing significant increases in existing plan rates, along with introduction of new plans having higher rates than their predecessors.
Consumers may very well be smarter than the industry gave them credit for, more fearful, better planners than anticipated, or all of the above. You see, hardly anyone is dropping his or her policy. Whats more, todays increased longevity means people are likely holding their policies longer, and even staying on claim longer, than their carriers may have projected.
In addition, results are emerging concerning carriers that used the “wrong” sellers and attracted the “wrong” buyers.
Simply put, the industrys manufacturers have been adversely selected against by too many agents willing to sell their oldest and sickest clients and finding the carriers na?ve enough to accept this risky block of business. This has shaken the viability, or at least the stability, of a few of the carriers, and a few others have decided to exit because of the lack of profitability or lack of penetration or both (they usually go hand in hand). Also this year, a national television “expos?” show skewered claims practices of one company, albeit from another line of business.
Insurance stocks are depressed (as are most), budgets are being trimmed, and, due to corporate pressures from above, various LTC insurance manufacturing leadership teams are being asked to produce sales and bottom line results that are hardly realistic, given the current environment.
Fortunately, there is good news, as well. For instance, in 2002, the federal government finally “bought in” (at least conceptually) to LTC insurance, by opening up enrollment in the federal governments LTC program to the governments 20 million-person family.