What's New: 2011 Position Paper
2011 Position Paper—“Let’s Not Get Fooled Again”
A brief summary on the State of the Long-Term Care Insurance Industry—And how it impacts employers and employees
The last half of 2010 was tumultuous for my industry. The perfect storm of historic and persistent low interest rates, and higher than anticipated claims, forced many of the “majors” to seek rate adjustments for existing insureds. Regulatory risk (the risk that state regulators will not grant the magnitude of the increases requested) finally persuaded MetLife to exit the business (Of course they must honor existing contracts.) And John Hancock’s surprise and disturbing request for average 40% increases have, in effect, removed them as a leader in the industry. Fortunately, painless and safe-solutions exist for employers and employees impacted by these events.
In the employer group arena MetLife will not issue new coverage, and John Hancock will- with the caveat that prospective insureds are aware of the potential for “significant premium increases”. This further opens the gate for adverse selection, and weakening of Hancock’s loss ratios, as only not healthy individuals will enroll if provided the opportunity. As an aside, John Hancock has shut down their group operation as it relates to new employer groups.
Is there a lesson to be learned here?
Yes, most definitely. Simply stated, none of us should be fooled again. We cannot take insurance companies on their word (we’re in it for the long haul and of course our business is healthy.) RetirementGuard’s mantra for 2011- and beyond- is claims loss ratios. Moving on we need to get smarter and dig deeper. And a great place to start is with the NAIC’s “Long-Term Care Insurance Experience Reports for 2009”. This gem reports claim loss ratios for any insurance company that ever insured long-term care risk. The ratios tell me a lot. First and foremost- more and more of us will need these products. Claims are higher- and running longer- than anyone imagined just a decade ago. Next, these ratios (low is good) tell me that most of the well known companies (TIAA included) have potential challenges as claims loss ratios are relatively high , in most cases higher than expected. And the blocks of business have not yet matured from a claims perspective.
Where does RetirementGuard go from here- and where can you go from here?
The need to protect our nest eggs from long-term care risk will not diminish.-it will only increase. This fact remains our basic tenet. And the industry will survive. Many companies have low loss ratios- and other new players, who will learn from prior mistakes, will undoubtedly fill a void. Moving forward RetirementGuard can only represent s the strongest companies with the lowest claims loss ratios. (click here) . Certain guaranteed premium asset linked products ( www.AssetLinkedLtc.com) are gaining traction- and can be included in 403(b), 401(k) and profit sharing plans. Proposed CLASS implementation in 2014 (www.ClassActProvisions.com) will also hasten a national dialogue and the need for private industry insured solutions. CLASS may ultimately be beneficial for some- but it is no panacea for comprehensive and expansive long-term care insurance. RetirementGuard is actually excited for what the future will bring- and we look forward to helping clients define issues and deliver suitable solutions.
We have access to state of the art asset risk modeling systems which can simply (voice recognition) enable employees to quantify the extent of their long-term care risk. We have low loss ratio traditional long-term care insurance products that need not be payroll deducted. We are leaders in the asset linked solution realm. These tools will allow your employees to protect their future with confidence. They will allow employers to avoid our collective past mistakes as it relates to affiliating with insurance companies that have made promises- and broken them.
