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Hancock Asks For Rate Hikes On Older LTC Policies

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John Hancock Financial Services says it has filed requests for rate increases for some of the long term care insurance policies it has originated.

Most of the policies affected were sold in the 1990s.

Hancock, Boston, a unit of Manulife Financial Corp., Toronto, has increased rates on policies in a block of closed business that purchased from Fortis, Brussels, in 2000, but the proposed rate increases are the first Hancock has requested for older policies that Hancock itself wrote.

The policies involved were sold in all 50 states.

If approved, the rate increases would average 14%. Rates on policies Hancock sold in the 1990s would increase 13%, and rates on the Fortis policies would increase 18%.

Hancock says it cannot make an adequate profit on the policies at existing rates because of low policy lapse rates.

“Over the past few years, it has become clear that some assumptions, particularly with respect to policyholder lapse rates, were inconsistent with the experience we have seen over the same time period,” a Hancock spokeswoman says.

Jesse Slome, executive director of the American Association for Long Term Care Insurance, Westlake Village, Calif., says LTC insurers have often been surprised to find that few buyers drop their policies.

The AALTCI recently found when it studied LTC insurance persistency that the product has an average first-year lapse rate of just 7.8%, and a second-year lapse rate of just 4.9%. By the end of 10 years, about 69% of consumers who bought an LTC insurance policy still have their coverage.

In contrast, only 46% of the purchasers of disability insurance policies would have their policies at the end of 10 years, and only 42% of the purchasers of individual life insurance policies would have their policies.

Genworth Financial Inc., Richmond, Va., cited low lapse rates in July 2007 when it filed for rate increases ranging from 8% to 12% on older LTC policies in all 50 states and the District of Columbia.

So far, 46 states have granted at least a partial approval of the requested increases, Genworth reports.


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