PRU EXITS GROUP LTCi MARKET
July 18 (Reuters) – Insurer Prudential Financial Inc said on Wednesday it would stop selling group long-term care policies, making it the latest insurer to step back from the historically money-losing product.
Prudential, the No. 2 U.S. life insurer, said it would stop selling policies as of Aug. 1 in all but five states. In those states, it is bound by law to keep offering policies for “a period of time,” though the length was not immediately clear.
Prudential cited the impact of persistently low interest rates for its decision. Analysts and consultants have said that life insurers would need to reconsider what products they sell given how low interest rates are, and how that could affect the insurers’ ability to generate returns sufficient to pay claims.
Long-term care is especially problematic, though, in that most insurers that offer it have suffered through sizeable losses. In the early days of the product, insurers underestimated the size and length of claims, and more recently the rate environment has exacerbated the problem.
The company’s closest competitor, MetLife Inc, stopped selling long-term care policies in late 2010. As of late 2011, fewer than 5 million people in the United States were covered by long-term care policies, according to LIMRA International.
Prudential said coverage under existing policies would not change, and would remain renewable. It cautioned that premiums could change, though, subject to regulatory review.
Because of the historical losses, it has not been uncommon for insurers to seek double-digit rate hikes in some states on long-term care products.
(Genworth, Transamerica, and John Hancock are other major carriers that remain in the group and multi-life LTCi market.)
EDITORIAL COMMENT: My advice to all agents and advisers is buy whatever long-term care coverage that you can in whatever form you believe to be appropriate for you (stand-alone, rider to a life or annuity, MoneyGuard, or State Life’s Asset-based contracts) while it is still available. Then, urge your clients to do the same. In force policies are guaranteed renewable and cannot be canceled as long as premium is paid. I bought mine for my wife and I some 12 years ago and have experienced one in force premium increase (about 14%). No complaints. If we ever need this care – and most estimates say 70% of those now age 65 will experience 6 months or more end- of- life care – the policy’s benefits will exceed premiums paid in within a few months. The need for having insurance against the risk of paying for long-term care has never been greater. A major carrier leaving the marketing of the coverage only emphasizes the increased need to BUY IT NOW…before carriers stop offering it altogether.
Designs In Life Insurance Marketing, LLC currently represents Genworth, Transmaerica, John Hancock, and American General in the long-term care stand-alone marketplace. We represent Lincoln National’s MoneyGuard and OneAmerica (State Life) “Asset-Care” and “Annuity-Care”. We also contract with quality life carriers that have LTC riders which can be included in their life insurance policies: Nationwide, John Hancock, and AXA. You don’t have to be an expert in LTCi planning to sell it. We will help you every step of the way.
