Apr 1st, 2014
Several of the top Long Term Care Insurance companies have been forced to raise premium rates in the past few years due to a number of factors. Amidst all the rate increases, some policyholders have been less than pleased, but others have taken it in stride, recognizing that there is indeed a good reason behind the increases.
Reasons for Rate Hikes
According to Tom McInerney, President and CEO of Genworth, most policyholders have taken the news well after taking some time to review the presented options. Despite what many people like to believe, insurance companies can’t simply raise rates whenever they feel like making a bigger profit. There are certain loss ratios that must be met before a company can even apply for a rate increase from state regulators. Even then, there is no guarantee they will be approved.
The persisting low interest rate environment, changing morbidity and mortality rates, and lower than expected lapse rates have led to heavy losses for most Long Term Care Insurance providers. Some have even left the market altogether. Genworth has made a deliberate decision to remain in the market and prioritize this type of insurance by approaching it with a new strategy. That strategy includes smaller rate increases more frequently and products that are priced and approved based on both the consumer and the company’s best interest.
Despite some rather large rate increases on old Genworth policies, McInerney explained recently that most policyholders have opted to hold onto their original plans and accept the rate hike. This is because they recognize just how valuable the policy is and the fact that it is still a great deal, even with the higher cost. The policies undergoing the largest rate increases include benefits that are no longer even an option, and as long as they can afford the new rates, holding onto those benefits makes perfect sense.
Among Genworth policyholders faced with a rate increase, 83% have chosen to accept the full rate increase and keep the same benefits. Another 12% plan to pay less than the full increase and reduce the benefits provided in their plan, which leaves 5% who will allow their policy to lapse. Understanding the huge value within these plans, especially the older plans that include unlimited benefit periods, can help consumers understand why the rate increases are necessary.
Long Term Care Insurance
The Long Term Care Insurance market is on its way to a much more stable environment, thanks to the more conservative estimates now being used by actuaries and the greater wealth of knowledge regarding morbidity and mortality that was hard to predict a few decades ago. Long Term Care Insurance policies can still be quite affordable if you do some research and compare different policies before buying.
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