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Life Health > Long-Term Care Planning

Consumer Reps Say Advisors Need Clients' LTC Insurance Rate-Hike Info

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What You Need to Know

  • Brenda Cude and Bonnie Burns interviewed financial planners to learn how their clients are affected by LTCI rate hikes.
  • When faced with massive LTCI premium increases, many advisors feel that clients are not presented with a full range of possible solutions.
  • Cude and Burns suggested that consumers should be able to authorize the release of policy-specific information to their chosen advisors.

Long-term care insurance issuers should give financial advisors more help with serving clients affected by LTCI rate hikes, consumer representatives told state insurance regulators Friday.

Brenda Cude and Bonnie Burns reported to members of the Long-Term Care Insurance Task Force, an arm of the National Association of Insurance Commissioners on the findings of their interviews with 14 financial planners. All said they would prefer to see typical clients agree to pay the higher premium, rather than dropping the coverage or accepting any “reduced benefit option” proposals offered.

But “sources of expert help are limited,” the consumer reps said, according to a presentation slidedeck included in an NAIC meeting packet. “Typically, the insurance agent who sold the policy isn’t available, and other professionals can’t get information from the insurance company.”

Part of the solution could involve requiring insurers to let consumers authorize the release of policy-specific information to their chosen advisors, Cude and Burns said.

What It Means

If you have concerns about some of the LTCI premium increase notices your clients have been getting, you have company.

The History

Insurers began offering nursing home-only coverage in the United States in the 1960s, when long-term care costs were much lower than they are today.

Insurers began to expand sales dramatically in the 1980s and 1990s. They began to offer more generous policies, which covered home care and assisted living facility stays as well as nursing home care, and they encouraged consumers to buy 5% annual compound inflation protection.

They turned out to be overly optimistic about almost every factor used in pricing, including how faithfully consumers would keep coverage in place, how often insureds would use their coverage, and how much interest they would earn on the bond portfolios supporting the benefits obligations.

The result has been insurers sending policyholders waves of notices of premium increases of 100% or more.

Regulators have required issuers to exempt some very old policyholders from the increases, and they have started to encourage or require issuers to offer affected consumers reduced benefit options, such as the elimination of inflation protection features, to eliminate or cut the premium increases.

The NAIC, a group for state insurance regulators, has set up the Long-Term Care Insurance Task Force to address concerns about some issuers’ solvency and concerns about the affected policyholders.

The Consumer Reps

The NAIC’s team of liaisons speaks for consumer interests in NAIC proceedings. The NAIC pays the travel expenses for some of the liaisons and calls them funded consumer liaisons.

Burns is a funded rep, as well as a training and health policy specialist with California Health Advocates. She trains people who help California residents with health coverage questions.

Cude is also a funded rep and a professor emeritus at the University of Georgia. She has been conducting personal finance research since 1976.

How Financial Advisors View LTCI Rate Hikes

Cude and Burns delivered their findings at a session of the Long-Term Care Insurance Task Force, which met in Portland, Oregon, at the NAIC’s summer meeting.

The reps noted that based their findings on qualitative research, without polling a representative sample of all financial planners.

The planners they did talk to reported that the average consumer who gets an LTCI rate hike notice is about 75, has paid the same premium for years and has only a vague of what the policy covers.

The planners said that insurers should have absorbed more of the extra costs.

From the planners’ perspective, the LTCI premium increase notices often seem to create a false sense of urgency, use wording that entices policyholders into dropping their coverage, and presents specified reduced benefit options as the only options for reducing the premium increases, not examples of possible solutions.

The reps suggested that the NAIC should develop a system that can tailor LTCI rate hike notices and reduced benefit option proposals to fit each policyholder’s situation.

(Image: Diego M. Radzinschi/ALM)


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