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LTCI Rate Hikes - Panic on the Streets?

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As part of our fifth annual LTCI Market Study, we ran an LTCI  carrier report card revealing how producers feel about the carriers they’re appointed with.

This year, John Hancock ranked in the top five for each and every category, along with other big-name carriers. The company tied for first place in “best overall” with Genworth.

But then, the news came out about John Hancock’s planned 40 percent rate increase, and the comment forum turned sour.

“I appreciate the survey and the results that are posted,” said Dennis E. McCarty. “However, I am wondering if agents feel as compelled to work with John Hancock after a recent article I received stating a 40 percent increase in the premiums for existing insureds? This type of news is discouraging to me in marketing LTCI when even the ‘Big Boys’ haven’t a clue on the pricing of this product. I want to be proactive in LTCI, but how do we do that when we can’t be sure of the pricing issue”

Another producer chimed in with a similar sentiment.

“I also see Dennis’ point about the pricing, and I had also heard about the JH 40 percent increase,” said a producer who identified herself as Connie. “That is huge! Is it an effort to get people to drop their LTCI coverage,because it will surely result in that. LTCI coverage is expensive to begin with, although it is a valuable coverage to have. This product has struggled since it’s introduction, and now, with our economic woes, people are going to be even more hesitant to purchase something that they still consider to be a ‘luxury buy’.”

Indeed, producers are wondering how they’ll cope with the newest rate hike. Investment News’ Darla Mercado reports that financial advisors and insurance agents are finding themselves in a tough spot with the proposed increase, which John Hancock is scheduled to begin rolling out in April.

And as Jesse Slome, executive director of the American Association for Long-Term Care Insurance, told National Underwriter Life and Health’s Trevor Thomas, the increase shows that “LTC insurance really is entering a stage of new realities. Basically, more people are going on claim, claims are lasting longer, and insurers’ investment returns are lower than ever. You have the triple whammy.”

We can’t single out John Hancock. According to, in 2010, New Jersey’s Department of Banking and Insurance  approved a 35 percent increase for Lincoln National; a 30 percent increase for MetLife of Connecticut; and 25 percent increases for both American General and Allianz.

Don’t blame the carriers quite yet. With long term care costs skyrocketing nationwide and more policyholders going on claim, a rate increase on existing policies is bound to happen. Still, it’s a far cry from just a few years ago, when many big names  hadn’t yet raised their rates on policyholders. In the 2010 LTCI Market Study, 14 percent of agents said rate increases posed one of their biggest LTCI sales challenges. I’d be interested to see if that number changes for the 2011 market study.

What are your feelings on the newly announced rate hike, and the similar news from other carriers? Does this spell trouble for the long term care insurance industry, or is it just a new challenge to be overcome like all the rest? Share your thoughts with us below!


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