In April 2007, Senators Barack Obama and Hillary Clinton requested that our Government Accountability Office examine the long term care insurance industry's track-record for claims, premium increases and those increases' relation to LTCi policy lapses. Will they find dirt under the rug?
Well, I'll give you the answer!
If you look at the long term care insurance industry's claims pay-outs, you'd be encouraged. Claim denials are extremely low compared to other types of insurance - and LTCi companies pay a LOT of claims" - $3.3 billion in 2006 alone. The largest claim as of Dec. 2006 was over $875,000!!! (Can you imagine paying that out of your pocket?) So, kudos for long term care insurance.
However, there are some LTCi companies that have given the entire industry a bad name, as well as giving consumers reason to pause. Companies that have sold inexpensive policies with lots of bells and whistles have felt the need to either sell off their long term care insurance business, ask for rate increases on existing policy holders or even deny or delay claims. "Low-balling" on what should have been "expensive" policies was definitely poor planning by those companies Some folks might even look at it as some type of fraud.
Some of the same companies had slack underwriting and would accept people who were higher risk, health-wise. This business strategy was a disaster waiting to happen.
Another issue has been one of rate increases. Some companies have increased rates on their policies, especially policies with unlimited lifetime benefits. Since a company has to put aside a million dollars for every unlimited lifetime policy, and since the price of long term care itself is inflating at over 6% per year, most companies who charged reasonable rates for these policies have had to ask for rate increases.
It seems that the LTCi players that are left on the field are being very careful these days. Long term care insurance now has enough "claimshistory" that actuaries can figure out what companies truly need to charge for each product. Most companies have tightened up their underwriting and some are not selling unlimited lifetime policies any longer. The ones that do charge hefty premiums.
All these factors are helping to strengthen and revivify the LTCi industry and to promote trust within consumers. Let's hope that this trust is warranted and that these improved policies will not suffer from rate increases in the future!
There's no doubt in my mind that any investigation into the LTCi industry will turn up some companies that had less than desirable claims pay-out and rate increase records in the past. Even so, I think that an investigation will find that the LTCi industry as a whole is one of the best in the insurance arena for paying claims. As far as raising premium rates goes, since LTCi companies cannot increase rates unless approved by a state's Dept of Insurance, perhaps states' DOI should not grant as many rate increases?
... Just a thought!
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Long term care insurance activist, CB Cotton, and his wife, Kimberly, write for
http://www.PrepSmart.com - The Online Baby Boomers Decision Assistance Center, where you get Free Long Term Care Insurance advice, comparative rate quotes and personal guidance, all while safely at home in your favorite pajamas and bunny slippers.
