John Hancock Increases Long Term Care Rates by 90%

[tlmarketing]

If you wanted to bring a class action against an insurance company for raising their rates due to bad assumptions, you'd have to bring a class action suit against every LTCi carrier on the planet.
You can't target the company for it's raising of rates as they disclaim that......I think where you can hit them is in their faulty underwriting practices and pricing.

Every company claims their rate increases are justified.
Their 4 main excuses are:
1) Policyholders are not dropping their policies as expected. So, this is an error in the company's methodology, right?
When this business started back in the early 1980s, it was a brand new product with no actuarial history. Actuaries looked at Medicare Supplementals for their statistics and saw that 8% of all policyholders dropped thier coverage. So, they used an 8% lapse rate. Would this still apply to policies issued 20 years later after all that prior claims experience?

The problem is that the actual lapse rate was much less @3%-4%. Carriers like nothing more than having a policyholder pay premiums for 10 years and lapse their coverage without the company paying claims. The difference of that 4%-5% cost the carriers a fortune of unexpected claims.
Again, the company made major mistakes....if a life company makes mistakes with their products of this magnitude, they pay for it in litigation.

2) Second on the list is that policyholders are going on claim sooner, younger & longer than anticipated. People are living longer and therefore spending more time in a LTC situation. (Which, actually shows you the value of a LTC policy)
Here's what I don't get....what age did they assume insureds would go on claim.....infinity???

3) Third up is the unanticipated lower interest rates. The company's reserves are sitting in accounts earning substantially lower interest than anticipated.

4) And finally, certain benefits of a policy were also based on false assumptions. It turns out that the costs for inflation riders, particullarly the 5% compound was way underpriced as was the lifetime/unlimited benefit option.
How does an insurance company screw up a 5% compounding?? Makes no sense to me, as they take the benefit x 5% add to the original benefit, repeat.

These 4 reasons are carbon copy for every company's bulletins to both agents and policyholders as to why these increases are justified.

Eventually they will get it right. Let's just hope when they do, it will be priced where it's affordable.

When pigs can fly...

 

[somarco]

.It is unbelievable that state insurance departments would allow 90% increases in 1 year.

Care to guess what happens if the increase is denied?

So wouldn't there be an opportunity for class action type suits that attack the underwriting practices and pricing assumptions made by john hancock?

You are kidding, right?

Increasing Premiums on Term Life Insurance Policy, Estate Planning, Retirement, Fraud - AARP

Consumers are misled by ltc companies

Misled? How so?

Do you think the carriers intentionally pulled a bait and switch because they knew it would result in a lot of positive PR?

Your statement is completely out of touch.

You can't target the company for it's raising of rates as they disclaim that......I think where you can hit them is in their faulty underwriting practices and pricing.

And you can prove this how?

the company made major mistakes....if a life company makes mistakes with their products of this magnitude, they pay for it in litigation.

For starters, you can't compare health insurance actuarial projections to life insurance.

Secondly, you must not be aware of the history of some life carriers that made:

- dividend projections that did not meet final results
- cash value (UL) that did not meet projections
- sales based on disappearing premiums
- sales based on income tax considerations such as the 4 of 7 rule

I could go on but clearly you need to understand more about the industry before you go running off your mouth.

Or in this case, your keyboard.

 

[Arthur Rudnick]

You can't target the company for it's raising of rates
as they disclaim that......I think where you can hit them is in their faulty underwriting practices and pricing.

Where is the fault? They had no history to go by and priced their products incorrectly. That happens everyday in business. They made an "educated guess" based on the facts in front of them and they were wrong.

1) Policyholders are not dropping their policies as expected. So, this is an error in the company's methodology, right?
This is an error in their actuarial assumptions.

Would this still apply to policies issued 20 years later after all that prior claims experience?
Although LTCi has been available since the late 70s & early 80's, if I had to take a guess, 90% of all policies were sold post 1995. That's only 15 years ago. Someone healthy, at the age of 60-65, are just about getting ready to go on claim. So now, it's starting to hit the fan.

Again, the company made major mistakes....if a life company makes mistakes with their products of this magnitude, they pay for it in litigation.

Keep in mind that life insurance has been around for over 150 years. The actuaries have had a long time to tweak their morbidity statistics and other costs of the policy. Not so for LTCi.

Here's what I don't get....what age did they assume insureds would go on claim.....infinity???

I'm not sure what numbers they were looking at 25 years ago.
But, life expectancy is higher today than in 1985, so people are living longer and for that reason, they're spending more time receiving care at the end of their lives.

How does an insurance company screw up a 5% compounding?? Makes no sense to me, as they take the benefit x 5% add to the original benefit, repeat.

True but over years, as the benefit grows so does the cost of care. Years ago, with a $200/day benefit, due to the lower cost of care, someone may have received home care of $100. The company only paid 50% of the benefit. Today, if the benefit has increased to $400/day, due to the increased costs of care, they may be using 300/day (66%). More money out of the carrier's pockets.
(Actually, I'm just guessing on this, but it sounds plausable)

This is not a story about John Hancock or any one specific company. You consistently hear the exact same reasons every company uses to justify their rate increase.

Just to make a point.........
I am in no way trying to justify the outrageous rate increases that the industry is going through. I'm just trying to give you the reasons why rate increases were requested by the carrier.

Are they valid reasons? At the end of the day, I think they are.

 

[Crabcake Johnny]

"Geez, we didn't know people would file claims this early"
Bullshit.

"Geez, we didn't know people would keep the policies without lapsing"
Bullshit

"Geez, we chose to enter the LTC market and wow-wee are things expensive!"
You're an ***

"Geez, the economy is down and we're not earning the interest rates we thought we would"
Did your actuaries get out of middle school? They didn't build the rate figuring the "maybe" we'd hit a down economy?"

 

[VolAgent]

Seriously John, how do you know lapse ratios on a brand new product? You have to assume. DI does not lapse like life does. Nothing gets replaced like auto does. But how do you know if the product has never existed before?

Also, find me anyone who really thought we'd see home mortgage sub 4%.

 

[Arthur Rudnick]

"Geez, we didn't know people would file claims this early"
Bullshit.

"Geez, we didn't know people would keep the policies without
lapsing"
Bullshit

"Geez, we chose to enter the LTC
market and wow-wee are things expensive!"
You're an ***

"Geez, the economy is down and we're not earning the interest rates we thought we would"
Did your actuaries get out of middle school? They didn't build the rate figuring the "maybe" we'd hit a down economy?"

You might as well also blame every state's DOI for approving both the product and the premiums.

Did you ever have a car repaired or a kitchen remodeled and were given an estimate that turned out to be under what the actual costs were?

The carriers "underestimate their costs".

 

[Crabcake Johnny]

Vol - these are multi-billion dollar companies with near unlimited resources at their disposal to determine if they're going to enter a particular market and if they do, what possible scenarios could arise.

You can go ahead and buy it. I don't. I think they go into it like a marriage - hoping for the best but gosh, if it doesn't work out then divorce is really easy.

3 state DOIs have just smacked Anthem in the mouth. Still waiting from them to pull out. MD denied John Hancock's rate increase in 2010. Are they still in MD? You betcha. Some of you guys need to lay off the Kool Aid.

(BTW, John Hancock to the MD DOI that if their rate increase was denied they'd have to "explore all of their options." It's 2012. Well?")

 

[Mr_Ed]

The amount of bullsh*t written on this forum continually amazes me.

 

[VolAgent]

Vol - these are multi-billion dollar companies with near unlimited resources at their disposal to determine if they're going to enter a particular market and if they do, what possible scenarios could arise.

You can go ahead and buy it. I don't. I think they go into it like a marriage - hoping for the best but gosh, if it doesn't work out then divorce is really easy.

3 state DOIs have just smacked Anthem in the mouth. Still waiting from them to pull out. MD denied John Hancock's rate increase in 2010. Are they still in MD? You betcha. Some of you guys need to lay off the Kool Aid.

(BTW, John Hancock to the MD DOI that if their rate increase was denied they'd have to "explore all of their options." It's 2012. Well?")

You're talking to the wrong guy. I like the approach of the mutuals. It is as expensive as can be, but never had a rate increase on existing business. They made extremely conservative assumptions.

Of course, our resident LTCi guru constantly likes to belittle them for high rates, and everyone else for calling out the JHs of the world for constant rate increases.

 

[somarco]

The amount of bullsh*t written on this forum continually amazes me.

I agree.

Unless you are talking about the things I post . . .