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.
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