Rate hikes. Temporary suspension of sales. What do these announcements mean for the long term care insurance industry?
John Hancock recently announced that it would be applying for rate increases averaging 40 percent for its in-force LTCI policies. This comes after an announcement that the company was temporarily suspending group LTC sales. These actions, especially from a company rated No. 1 in eight out of 10 categories in our 2010 LTCI carrier report card, may not bode well for the long term care insurance industry.
Then there was that mess back in July, when Conseco raised LTCI rates in California by 35 percent. But as it turns out, large LTCI rate increases have been happening for some time. Just last month, Congressman Frank Pallone, Jr. said he was investigating premium hikes, starting with four companies — not including John Hancock— that he said raised rates for New Jersey customers 25 percent to 35 percent. And three years ago, CNNmoney ran a story about someone who bought an LTCI policy from Equitable Life & Casualty, only to see their rates jump 30 percent the following year.
But what does all this mean? Is there trouble ahead for the LTCI industry? Should you just throw in the towel and leave your clients to fend for themselves and get a CLASS policy?
Many industry experts say that, while one of the biggest challenges to selling LTCI remains perceived cost, long term care insurance is still one of the most underpriced products available on the market. And while the headlines proclaiming rates and prominent companies suspending their sales might not ease your customers’ worries, you – as a seasoned professional – certainly can.
Your clients are living longer, increasing the likelihood that they’ll experience a long term care event during their lifetime. Millions in LTCI benefits are paid every year. This means that more people are cashing in their LTCI policies – but that also means that rate hikes are inevitable (and probably justifiable). Talk to your clients about the possibility of living a long time through a long term care event – or even more than one – explain why the rate increases make sense, and then see if they become more comfortable with the idea. Chances are, they’ll warm up to it – and the LTCI industry isn’t going anywhere.