United of Omaha to Raise Rates 40%?

who's running the asylum

oneflewover2.jpg
 
As for UOO raising rates 40% . ..that seems a little steep but they have been know for their rate increases. I have seen some of my clients get a 20-30% increase over a year period. Usually they have one increase Jan 1 and then another one around mid year or when the policy was issued. When I first started selling the supplements were originally called Mutual of Omaha, then it was United World, now its United of Omaha. They are known to come out with lower than average premiums hike the rates 2 times a year then discontinue the supp (current policyholders grandfathered in) and then open up with a new supplement name, owned by Mutual of Omaha. Its marketing and it works well for them. As for the company themselves I have sold a decent amount for them, I just sometimes end up having to move my clients faster than I would with other companies.
 
Wow... that's new information we've never heard before. Thanks for the insight.









warning: websarcasm was used in this post
 
Carriers do the same thing in major med. Lowball rates, write a lot of business, close the block to new business, jack rates on the closed block.

Wash, rinse, repeat.
 
some of my clients got 20% rate increases in January 2011 and now their receiving another 20% rate increase April 1 2011. Med supp companies should only be allowed to raise once a year. There are some companies that do that, to bad United of Omaha isn't one of them
 
Yep. I really like the carriers that only raise on the policy anniversary. Those that do the across the board annual increase then the birthday increase get on my nerves.
 
The following information is not intended to defend Mutual of Omaha but are all the things that can cause the 40% + rate increases in the second year:

1) If you sell Mutual Medicare supplement products it's likely because they offer the lowest rate at the time.

2) A 20% rate increase on a $100 premium will still end up costing less than a 10% rate increase on a $112 premium.

3) Mutual of Omaha products have a 12-month rate guarantee. This causes 2 rate increases in the 2nd year. The first will be the rate increase they avoided within the guarantee period which they will receive at the end of their 12 months. The second will be the normal annual rate increase for that year (after the one that occurred within the first 12 months).

4) You can sell a policy up to 6 months before an applicants start date in a GI situation and they will receive the rate as of their signature date. This can compound the issue with the 12 month rate increase. This makes it possible for people to receive 3 rate increases within their 2nd year of actually owning the policy.

5) If the person was age 66 or older they will generally get between a $3-5 increase for their new age.

Between 1st & 2nd yr rate increases and age adjusted rates you can certainly and not too infrequently see a near 40% increase in the 2nd year. This would be true, however, of any company that offers a 12-month rate guarantee.

An example worst case scenario would be as follows:

In your state United of Omaha has their annual rate increases each January. In December 2010, you sell a client a UoO policy to start on May 1, 2011. This allows them to avoid the rate increase that would have normally occurred on January 1. As expected, United of Omaha had a rate increase of 18% on January 1, 2011 that did not impact your client's rate due to the 12-month guarantee. One year later, in May 2012, the client take the 18% rate increase from January 2011 and a 12% rate increase from January 2012 which they had avoided until that time due to the rate guarantee. This is effectively a compounded increase of over 30%. If they were 66 or older they will likely get about a $5 increase for their new age. Now we're getting closer to a 40% rate increase from their original rate. Even worse, just 8 months later they will get the January 2013 rate increase of 14%.

So, in this scenario, they will have received 3 rate increases (Jan 2011, Jan 2012, and Jan 2013) in the 8 months from May 2012(ehich is 12 months after their policy start date) to Jan 2013 and their rate will have likely increased over 40% from their original premium.

I hope you were able to follow along. I've tried, in the past, to proactively help my clients uderstand what's going to happen in the second year with rates but I tend to lose them. So, I don't even try anymore.

I don't see anything shady here. Just normal annual rate increases, the negative effects of the 12-month guarantee which is intended to be helpful to the client, and bad timing.

Closing blocks of business and opening new blocks under a different subsidiary is questionable but understandable to an extent.
 
The following information is not intended to defend Mutual of Omaha but are all the things that can cause the 40% + rate increases in the second year:

1) If you sell Mutual Medicare supplement products it's likely because they offer the lowest rate at the time.

2) A 20% rate increase on a $100 premium will still end up costing less than a 10% rate increase on a $112 premium.

3) Mutual of Omaha products have a 12-month rate guarantee. This causes 2 rate increases in the 2nd year. The first will be the rate increase they avoided within the guarantee period which they will receive at the end of their 12 months. The second will be the normal annual rate increase for that year (after the one that occurred within the first 12 months).

4) You can sell a policy up to 6 months before an applicants start date in a GI situation and they will receive the rate as of their signature date. This can compound the issue with the 12 month rate increase. This makes it possible for people to receive 3 rate increases within their 2nd year of actually owning the policy.

5) If the person was age 66 or older they will generally get between a $3-5 increase for their new age.

Between 1st & 2nd yr rate increases and age adjusted rates you can certainly and not too infrequently see a near 40% increase in the 2nd year. This would be true, however, of any company that offers a 12-month rate guarantee.

An example worst case scenario would be as follows:

In your state United of Omaha has their annual rate increases each January. In December 2010, you sell a client a UoO policy to start on May 1, 2011. This allows them to avoid the rate increase that would have normally occurred on January 1. As expected, United of Omaha had a rate increase of 18% on January 1, 2011 that did not impact your client's rate due to the 12-month guarantee. One year later, in May 2012, the client take the 18% rate increase from January 2011 and a 12% rate increase from January 2012 which they had avoided until that time due to the rate guarantee. This is effectively a compounded increase of over 30%. If they were 66 or older they will likely get about a $5 increase for their new age. Now we're getting closer to a 40% rate increase from their original rate. Even worse, just 8 months later they will get the January 2013 rate increase of 14%.

So, in this scenario, they will have received 3 rate increases (Jan 2011, Jan 2012, and Jan 2013) in the 8 months from May 2012(ehich is 12 months after their policy start date) to Jan 2013 and their rate will have likely increased over 40% from their original premium.

I hope you were able to follow along. I've tried, in the past, to proactively help my clients uderstand what's going to happen in the second year with rates but I tend to lose them. So, I don't even try anymore.

I don't see anything shady here. Just normal annual rate increases, the negative effects of the 12-month guarantee which is intended to be helpful to the client, and bad timing.

Closing blocks of business and opening new blocks under a different subsidiary is questionable but understandable to an extent.

Good explanation, thanks for sharing.

It is also going to make a difference if the company is Attained Age in a state or if it is Issue Age. In TX MOO is Attained Age, annual increases, in MO they are Issue Age, not necessarily annual increases.
 
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