Many big name insurers are getting out of the long term care business, referred to as LTC, due to a struggle to make a profit – names like Aetna, Metropolitan Life and Equitable Life. One can’t ignore, this business is in bad shape. Many that are still in have been pushing their rates up – in fact John Hancock just asked for another rate increase of close to 40% in order to make ends meet.
Presently, the sector views their industry in an investment snare. “Between half and two-thirds of all claims are actually paid from a company’s investment income,” states Jesse Slome with the American Association for Long-Term Care Insurance. With poor results coming from stock portfolios and record low interest rates the market is finding hard to make their claims, thus leaving no other option than to increase rates even more as time goes on.
With a larger portion of the rate adjustments landing on existing clients many consumers are not able to make payments – cancelations have been on the rise due to households cutting back any way possible. Also, new sales are hurting too; although the new higher rates are already built into these premiums, so new clients shouldn’t see their premium go up down the road – or at least for a little while.
The industry might have added to their own misery with miscalculations too. With people living longer under care, claim amounts are increasing. Along with many insurer’s adding richer benefits that might have been underpriced to begin with.
All in all, this business is too big to fall…don’t count on it going away anytime too soon. Just make sure when shopping that you go with big company names, A financial ratings and check with your employer first for group rates – this can be the cheapest way to go.