LTCI Watch: Run

One oddity about classifying LTCI as the kind of product that might lead to runs, or other system-destroying crises, is that one of insurers’ big problems with managing blocks of LTCI business is that the policyholders have been much more likely than expected to cling to the policies. LTCI issuer executives have reported that policyholders have generally kept policies in force even in the face of big premium increases.

Another oddity is that the bank regulators are alarmed about the possibility that LTCI could somehow contribute to a run on financial institutions but, apparently, not especially interested in the near inevitability that, if scientists do not come up with a reliable strategy for preventing, curing or controlling Alzheimer’s disease within the next 15, the baby boomers are going to start turning 85; using a large amount of long-term care (LTC) services; draining cash from private insurance policies, private savings, private investments, relatives’ resources, and government resources to pay for formal LTC services; reducing loved ones’ capacity to work at an appropriate level outside the home; and drawing paid workers into the LTC sector, from other sectors that might do more to sustain our access to the necessities of life, such as food and water.

To keep MetLife from leading to a lightning run on the financial system through some difficult-to-envision mechanism in a year or two, the Fed wants to push MetLife…away from trying to prevent a slow, steady, insidious, easy-to-envision “crawl” on the financial system in 2030.

To quote Snoopy’s friend from Peanuts, Linus, “B-blanket… need… blanket…!!”