John Hancock Life Insurance Company is telling distributors it plans to raise rates for in-force long term care insurance policies 40%.
Hancock, Boston, also is suspending sales of group long term care insurance (LTC) policies as it undertakes a review of claims in that market, says Marianne Harrison, president of John Hancock Long Term Care, a division of Manulife Financial Corp., Toronto (NYSE:MFC).
Hancock plans to file for rate increases in all states this month and possibly even this week, Harrison says.
She is disclosing the rate increase and group policy suspension in a telephone conference with the company’s LTC insurance distributors today.
Hancock announced the moves after its recent claims study showed unfavorable claims patterns, Harrison said in an interview.
Hancock’s claims studies, conducted every few years, examine LTC morbidity and termination claim trends based on actual experience. The last time Hancock undertook a thorough LTC claims review was in 2006, the company says.
This year’s study encompassed both open and closed claims, looking at all LTC claims Hancock received from 1990 to 2010.
As the LTC block continued to mature, Hancock’s latest study found it had twice the number of claims it found in its 2006 study. For older policy holders–ages 80 and up–the block had 4 times as many.
The severity and duration of claims in 2010
also were much higher than in 2006, Harrison says, while claims terminations were lower than expected.
Mortality improvements observed throughout the LTC and life insurance industry have led to more people reaching the age where claims are more likely to occur, Hancock says.
“Put simply, more people used the insurance than anticipated, reinforcing the value of the product to policyholders, but creating a pricing issue,” Hancock says.
The proposed 40% rate increase is subject to state acceptance, although not all states require approval of LTC premium increases by their regulators.
To accommodate policy holders who could not afford the increase, Hancock will be