Maryland Law May Prohibit John Hancock Increase

[JMO Fan]

LTC death spiral killed National States, to cite a recent example. Conseco (now SHIP) further back.

Big rate increases on major medical are to cover next year's claims. Past rates might have been OK.

But big rate increases on LTC are for life. They mean the rates have been too low for too long. It might not mean the carrier has lost money, just that they expect to lose money - perhaps far out in the future.

 

[Mr_Ed]

LTC death spiral killed National States, to cite a recent example. Conseco (now SHIP) further back.

Big rate increases on major medical are to cover next year's claims. Past rates might have been OK.

But big rate increases on LTC are for life. They mean the rates have been too low for too long. It might not mean the carrier has lost money, just that they expect to lose money - perhaps far out in the future.

Nat'l state?
Conseco Senr health?

OK... can someone name any LTC insurers that are rated at least A- by AM Best... that have said that they are losing money on LTCi?
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LTC death spiral killed National States, to cite a recent example. Conseco (now SHIP) further back.

Big rate increases on major medical are to cover next year's claims. Past rates might have been OK.

But big rate increases on LTC are for life. They mean the rates have been too low for too long. It might not mean the carrier has lost money, just that they expect to lose money - perhaps far out in the future.

??? So, LTCi rate increases are "for life" but medical insurance rate increases are "not for life"? You're saying that the medical insurance rates might go up this year, but then next year they might be lower than they were two years ago? Which medical insurance policy does that?

 

[Crabcake Johnny]

I'll include individual health with LTC so you don't think I'm just bashing LTC.

My auto rates have barely budged since I was driving. I'm certainly not getting hit with 40% increases every few years.

My 30 year term is set - that won't budget either. The problem with selling clients health or LTC is they're renting the policy.

Health ticks up around 10% or so a year which may seem innocuous until you realize it's 100%+ increase over 10 years. Carriers count on the fact that those paying $500 now can't pay $1,000.

I'm readily admitting that I don't know squat about LTC...but seems pretty hard to put your heart and soul behind the sale to, for example, a 60 year old when odds are that by the time he'll actually need it, the rates will be jacked through the roof.

Of course, somehow new business rates stay just fine. My family can buy health insurance for around $400 a month. How is that possible? With rate increases over the past 20 years wouldn't my base rate be well over $1,000?

No...new business rates are always lowballed to keep fresh meat coming in. After a few years...that's when we see the price adjustments.

 

[Mr_Ed]

No...new business rates are always lowballed to keep fresh meat coming in. After a few years...that's when we see the price adjustments.

That may be how new business rates for medical insurance work, but that's not how new business rates for long-term care insurance work.

In fact, in some states, new business rates MUST BE higher than any rate increase requests on in-force policies ("old business").

Or, to say it another way, any rate increases on older policies MUST result in the increased premium being LOWER than what new applicants are paying.

(That's just the opposite of how medical insurance works, isn't it?)

 

[Norwayguy]

I'll include individual health with LTC so you don't think I'm just bashing LTC.

My auto rates have barely budged since I was driving. I'm certainly not getting hit with 40% increases every few years.

My 30 year term is set - that won't budget either. The problem with selling clients health or LTC is they're renting the policy.

Health ticks up around 10% or so a year which may seem innocuous until you realize it's 100%+ increase over 10 years. Carriers count on the fact that those paying $500 now can't pay $1,000.

I'm readily admitting that I don't know squat about LTC...but seems pretty hard to put your heart and soul behind the sale to, for example, a 60 year old when odds are that by the time he'll actually need it, the rates will be jacked through the roof.

Of course, somehow new business rates stay just fine. My family can buy health insurance for around $400 a month. How is that possible? With rate increases over the past 20 years wouldn't my base rate be well over $1,000?

No...new business rates are always lowballed to keep fresh meat coming in. After a few years...that's when we see the price adjustments.

Might want to recheck your math if you rates inch (probably the wrong analogy) 10% per year in ten years the cost will be 159% of the first years cost.

Also John you make it sound like LTC policies are getting multiple increases in a frequent period of time...Many blocks have not had increases so have had 1 increase, it would be better to compare LTC to DI as in if you compare Guaranteed Renewable policy which many DI & LTC policies are they are sold on the current rate with the insurer Guaranteeing the insured can keep the policy as long as premium payments are made and the only thing the Insurer can do is change the premium even though most policies are sold with the thought that those increases would be rare and they have been for the most part....Now policyholders in DI can get a Non-Can policy in which the rate is guaranteed to not change and people that go with short pay or single pay LTC policies also have that guarantee.

 

[Mr_Ed]

Originally Posted by healthagent
No...new business rates are always lowballed to keep fresh meat coming in. After a few years...that's when we see the price adjustments.





That may be how new business rates for medical insurance work, but that's not how new business rates for long-term care insurance work.

In fact, in some states, LTCi new business rates MUST BE higher than any rate increase requests on in-force policies ("old business").

Or, to say it another way, any rate increases on older LTCi policies MUST result in the increased premium being LOWER than what brand new LTCi applicants are paying.

(That's just the opposite of how medical insurance works, isn't it?)

 

[Crabcake Johnny]

Seems to me with that method, as time goes by and rates get increased it becomes more and more difficult to sell the product.

Although it admittedly sucks that health insurance operates that way, it keeps new business rates low.

 

[Mr_Ed]

Seems to me with that method, as time goes by and rates get increased it becomes more and more difficult to sell the product.

Although it admittedly sticks that health insurance operates that way, it keeps new business rates low.

It does NOT get harder and harder to sell. The only reason you think that is because you think that rates are constantly being increased.

Most LTCi policies that are 15+ years old have NEVER had a rate increase. Most of the rate increases have been on policies that were sold between 1995 and 2002.

Since 2003 (when most of the LTC rate stabilization guidelines came into effect) both new business rates and in-force rates have been remarkably stable. (hence the name "rate stabilization".)

Some LTC insurers "new business" rates are only about 6% higher today than they were 8 years ago.

The reason some states require that new business rates be higher than "old business rates with premium increases" is because the states are purposely discouraging insurers from "low balling" new business rates.

 

[scagnt83]

You have to read between the lines, but they have basically said it.

The quarterly conference calls tell you a lot more than any press release or producer memo.

While Im not going to go back and look it up, I will paraphrase a Manulife conference call that I read over earlier this year (yes I read the Manulife conference calls since I own stock in them);
they said that the traditional LTCI market is quickly making a shift to hybrid policies because of the overwhelming & well known challenges of keeping a block of business profitable. This is why JH is pushing the LTC riders and their new hybrid policy more and more over the old traditional LTC. They say that they will continue to make changes in existing business along with shifting core LTC business to products that fit their business model (aka: products that make money).


So they did not directly say that they are loosing money, but indirectly they said that traditional LTCI is not a profitable business.


Let me ask you a question; If traditional LTCI is such a profitable product, then why are companies only dropping the product and not adding it?
Why have no major insurance companies added it as a new product line?


NDM,
Dont get me wrong, I sell LTC when I see a need for it. I believe in the value of LTC. I am the last person who wants the LTC industry to go away; and I dont think that it will completely go away, it will just change drastically.

I am not yet a fan of hybrid LTC/LI policies, but the LTC/FA products are not bad and I have a feeling that this will be the route taken by most companies in the future.... even though you are basically just self insuring through it....


Lets say that the companies messed up on old business and are now basing new offerings on the history of the old biz.
On the surface that makes it sound like everything is fine now.
But we have yet to have the boomers start making claims.
And as more and more companies discontinue traditional LTC, people will start seeing the value in it more and more and the lapse ratios will be even less than they are now...
So if lapse ratios (which JH has repeatedly named as a main cause of rate increases and discontinuations) could lessen even more once the boomers hit nursing home age, then that means that the current assumptions being used will again be wrong.

 

[Crabcake Johnny]

It does NOT get harder and harder to sell. The only reason you think that is because you think that rates are constantly being increased.

Most LTCi policies that are 15+ years old have NEVER had a rate increase. Most of the rate increases have been on policies that were sold between 1995 and 2002.

Since 2003 (when most of the LTC rate stabilization guidelines came into effect) both new business rates and in-force rates have been remarkably stable. (hence the name "rate stabilization".)

Some LTC insurers "new business" rates are only about 6% higher today than they were 8 years ago.

The reason some states require that new business rates be higher than "old business rates with premium increases" is because the states are purposely discouraging insurers from "low balling" new business rates.

I just think this is an overly rosy picture of the market based on what I've hearing lately.

Long-term care rates soar | tennessean.com | The Tennessean