"A
good plan today is better than a great plan tomorrow."
- George S. Patton
Long
Term Insurance Update - Pending Premium Price Increases
The
major LTC carriers are now bringing out new policies every
18-24 months. These companies are more aggressive and proactive
in managing their potential loss exposures. There is a concern
that less than 1% of policyholders actually lapse their
policies – thus the insurance companies will have
a higher than expected claims experience. Low interest rates
are impacting investment results. Dementia claim experience
is up – causing a greater and longer use of benefits.
The
state insurance departments are putting increased pressure
on the companies to adequately price the new policies. The
regulators expect that higher new policy pricing will result
in long term price stability. In short, the regulators do
not want the companies to come back requesting price increases
in the future.
Underwriting
standards are being tightened, thus making it more difficult
to gain preferred (lowest) premium rates. Some new applicants
that have delayed applying are now finding that they are
declined due to certain medical issues.
On
new products, general premium increases are running at 10-15-20-30%,
depending on the company, age and desired benefits. Thus,
if one is interested in purchasing a policy, it will pay
to move ahead promptly before one is forced to purchase
a new, more expensive product. People buying tomorrow
will be subsidizing the people that bought yesterday.
Dementia
- Learn the Basics
Recently,
a major LTC insurance company told me that roughly 44% of
claim payments in the past 24 months were Mental/Brain Disorder
caused. As the population ages the potential for dementia
grows significantly. Alzheimer’s Disease (AD) is the
most common form of dementia. The
National Institute of Aging reports that approximately
4.5 million Americans suffer from AD. Fifteen to twenty
years ago AD was not that common. Generally, the population
was dying before entering into the elder senior years (age
85+). With life expectancies dramatically increasing (please
refer to my recent article
about life expectancies), we are finding that
it is common for relatives and friends to develop dementia.
Caring
for most persons with AD is both physically and emotionally
demanding. The rate of progression varies from person to
person – AD progression is usually slow and steady.
The AD Association
reports that from the time of onset, the lifetime of a person
with AD can range form 3-20 years. AD patients must pay
additional for their specialized care in a facility.
Thus,
on Long Term Care policies, lifetime benefits is a critical
planning decision to protect against the potential cost
of multiple years of care. For additional information about
this important issue, please view my recent article
about Dementia and Alzheimer's Disease.
-
John B. Linvill Jr., CSA
