Long term care insurance agents appear to be reacting glumly but calmly to John Hancock Life Insurance Company’s announcement that it is filing for long term care insurance rate increases averaging 40%.
The increase, along with Hancock’s announcement that it was suspending group LTC sales at least temporarily, “doesn’t bode well” for the LTC insurance industry, says Peter S. Gelbwaks, president of Gelbwaks Executive Marketing Corp., Plantation, Fla.
Hancock, Boston, a unit of Manulife Financial Corp., Toronto (NYSE:MFC), has been one of the pillars of the LTC insurance industry.
But Gelbwaks says he feels the rate hike was necessary, and he points out that a number of LTC carriers have raised rates for in-force policies in the past few years.
“Here’s the concern: 90% of Americans still haven’t purchased a [LTC] policy, one reason being it’s too pricey,” Gelbwaks says. “At same time, the experience of the industry is proving, based on usage, that the products are actually underpriced. We need to reevaluate where we stand and look at product offerings more closely, if we all agree they’re underpriced, with people living longer and not lapsing their policies.”
If Americans think the product is overpriced, the industry needs to show them they need to look again, Gelbwaks says.
“We have to change our message and tell people why it’s such a good buy: Because people are using it,” Gelbwaks says. “We are paying millions in benefits.”
He predicts that single-premium sales will get a large boost as people look for guaranteed rates for LTC coverage.
As Hancock’s rate increase shows, “LTC insurance really is
entering a stage of new realities,” says Jesse Slome, executive director, Association for Long Term Care Insurance, Westlake Village, Calif. “Basically, more people are going on claim, claims are lasting longer, and insurers’ investment returns are lower than ever. You have the triple whammy.”