Hancock Plans to Raise LTC Rates 40%
NUL Daily eNewsletter, 9,21/2010
This story has been generating letters ever since its initial electronic publication and its subsequent republication in the October 11 issue of National Underwriter Life & Health. What follows is a selection of some of the responses we have received.
With this latest round of “mispricing” by one of the largest and most experienced carriers I will have a great difficulty continuing to recommend the purchase of LTCI in the financial plans of moderate to upper middle income retirees. The more I look at it, many clients for whom a purchase would have been appropriate will be better off planning forward for public benefits to meet their needs. Thinking further, it may even be maleficent of me to recommend that a family spend upwards of 7% to 8% of their retirement income on LTCI with no assurance the policy will remain in force with anywhere near the benefit set applied for. So much for the private sector being able to create a solution for long-term care expense risk. How unfortunate. By the way, if this is the experience of one of the “biggest and best”, what does this portend for the unfortunate policyholders of the multitude of “new” entrants to the field who lack even this experience? Oh my. Keep that E&O updated!
Evidently when it came to proper LTCi pricing, Hancock was running a fifty yard dash, when it should have been pricing to run a marathon. Talk about a betrayal of trust to both the policyholders who purchased, and the advisors who recommended and sold their products.
Thomas R. Schwebach, CLU, ChFC, CASL
Let’s be realistic, guys. One would assume that the existing premium dollars make the product unsustainable, or Hancock would not risk alienating agents, brokers, and consumers. Selling LTCI is difficult, and now just became harder. But Hancock isn’t the only carrier who’s repricing their LTC product. Consider alternatives that may be ultimately a better, more stable choice for your clients. 1. A variable annuity with or without a long-term care rider, primarily for people still active in the work force. Even without the long term care rider, the annual withdrawals at age 75 or 85 could be ear-marked for long-term care costs. 2. Life insurance with a long-term care rider. There are some very interesting plays here. A number of permanent life insurance products can incorporate long-term care benefits, with the payment of an additional premium for the rider. And, there are several carriers now offering single premium combination life insurance and long-term care policies.
No surprise. This is what happens, has happened, and will happen again when a company (whether mutual then stock, or stock from inception) plans on policies lapsing before a claim is paid. Hancock did it better than most early on, but with the underpricing initially and likely current pressure to keep the stock price from tumbling, it was only a matter of time. Two companies did it right early on: Northwestern Mutual and New York Life. In fact, they pay dividends on premiums now, reducing premiums rather than increasing them on the in-force block of business. Too bad they have a captive distribution system, otherwise agents would sell only those companies’ products to do a better job for the client, and to avoid a potential E&O issue. We assume the client is aware of what they’re signing on for, but when taking the application how many of us really discuss the LTCi industry’s multiple past faux pas?
If this is such a big deal, go buy from New York Life. In the 30 years we’ve sold LTC, there has never been a rate increase in our premiums for LTC. We’re a bit more expensive short-term, but over an extended amount of time, we’re proven to be less costly. NWMu can say the same things. When you’re looking for any kind of insurance, life or LTC, you need to look for a company with very deep pockets…and a lot of cash in reserves. Quality wins in the long run every time.
National Underwriter welcomes your thoughts and responses. Please send your letters to us at 33-1 Newark Street, Hoboken, NJ 07030 or e-mail them to firstname.lastname@example.org. Also, we encourage you to post on any and all blog posts and online stories we publish. Be heard!