Prudential Insurance recently announced that they are exiting the long term care insurance business….their reason why?
According to Malcolm Cheung, vice president of long term care at Prudential -
“the decision to exit the individual long term care business reflects the challenging economics of the individual market.”
Interesting….Is it possible that Prudential underpriced their long term care products in order to lure consumers with attractively priced LTC????? What happens now to the consumers who purchased long term care insurance, only to see their company exit the market?
Interestingly enough, there was a recent article in the Washington Post that contained some eye opening comments from none other than Sandy Praeger, who is the Kansas Insurance Commissioner and also heads the National Association of Insurance Commissioners health and managed care committee.
In the Washington Post article, Commissioner Praeger indicated that one of the key concerns of consumers is the rise of premiums…”it’s probably the most frequent complaint I hear,” says Praeger.
But those aren’t the eye opening comments….What Praeger said next may be foretelling of the long term care insurance industry in the future…direct from the Washington Post article…
“The problem is, the older policies weren’t priced right to begin with. Companies expected about 8 percent of customers to stop paying their premiums, when, in fact the lapse rate is closer to 2 percent.”
That meant the insurers had to cover more beneficiaries than they expected at a time when the economic downturn has meant less return on their investments.
Praeger acknowledges that rate increase requests have posed a dilemma for insurance commissioners. “If we don’t give them the rate increase they need, the insurance carriers could become financially impaired, and that doesn’t help people,” she says. In fact, in recent years, a number of companies have stopped selling policies. As a result, she adds, it’s hard to turn the increases down.
So, if you are a consumer with a long term care policy from any company who is no longer writing long term care insurance, what do you think will happen to your premiums in the future??? It sounds like the long term care insurance industry already knows…
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