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Archives for September 2016

Ding Dong the Wicked Witch of LTCi Rate Hikes is Dead

September 9, 2016 by Honey Leave a Comment

The following is a guest blog by my friend and highly respected LTCi colleague, Ron Hagelman, who can be reached at rhagelman@broadtowerinsurance.com, www.BroadtowerInsurance.com.

The article laments the undeserved, unintended ill-will earned by the LTCi industry. Ron’s sentiment matches my own and expresses the widespread confidence of LTCi actuaries that LTCi pricing is now extremely rate stable. Here are blogs I’ve written about rate hikes.

Here is info on the Society of Actuaries study Ron refers to.  Thanks, Ron, for allowing me to re-publish this.

Wicked Witch“There are simply those who, even after repeated exposure to the glare of the truth, are subsequently unable to admit they were wrong. Our industry suffers seriously from this flaw in human behavior. Far too many have conveniently pointed the finger of blame at those responsible for our lifeless interest environment (whoever those people are) and not taken sufficient responsibility for the “mistakes” that were made in our past pricing assumptions. “We” got it way wrong and the damage done to all concerned is much more extensive than many are willing to admit. Stand-alone LTCI sales are a shadow of their former selves. The destruction to new sales caused by repeated rate increases is pervasive and insidious. We have unfortunately created a general public malaise and aversion to all things LTCI both in terms of those who we said were the smart ones for leveraging their risk early and those prospective buyers considering the security of policy ownership. What is of course much worse is that we have successfully decimated the ranks of those willing to help sell the product. The age-old equation is now painfully obvious to all concerned: rising premium creating falling sales culminating in a drastically reduced field force. This artificially created sales spiral is much more than just a self-fulfilling prophecy. We must first admit that it is also a self-inflicted wound.

We must first freely admit and acknowledge our own culpability. Frankly, we over built benefits, underpriced mortality and morbidity, and overestimated potential sales in the initial rush to achieve market share. We completely missed the whole side of the barn in terms of persistency and honestly we were basing our future experience on far too little actual claims data.

That Has All Changed!

“Ding Dong the Wicked (Rate Increase) Witch is Dead!” The Society of Actuaries has recently completed a research project designed specifically to evaluate the historical potential for rate increases.   The research clearly indicates that products priced today are much less likely to have future rate increases. What is absolutely certain over the last 15 years is that the need for long term care services and support, the growth of assets and income needing protection, and the certainty of a need for expensive care is now greater than ever. We have also accumulated a substantial volume of claims information upon which to more accurately base current pricing.

The conclusion of the SOA analysis is that confidence in current pricing “should” be at an all-time high. Claims data is no longer scarce. We have an abundance of claims to evaluate at this time, meaning we have reduced the potential likelihood of future rate actions. According to the SOA, “Premium stability on today’s LTCI prod- ucts is at its highest.” The SOA identified a number of benefits of the new pricing stability as the study found that, “Claim experience nationwide in 2014 was 70 times more credible than in 2000.” The fact that we now have a history to evaluate has laid the groundwork for future carrier optimism concerning this market. Pricing stability contributes to:

  • Greater carrier confidence in assumptions concerning lapse, morbidity and mortality.
  • Less operational administrative risk translating into lower expenses. Constant change is expensive.
  • Less friction on the regulatory level and potential stress on reserves.

Restoration of consumer confidence at this point is a massive undertaking.

The Study also illuminated the validity of what we knew were serious contributing factors:

  • Long term investment return has fallen dramatically from 6.4 percent in 2000 to 4.6 percent in 2014.
  • Commissions have crept up during the same period of time, emphasizing first year compensation, and while administration expenses have declined.
  • Based on experience, allowable margins for error have also increased.

What is important is that we have learned from our experience and that the relative predictability of current premiums has risen from a low of a 40 percent chance of a future need to raise premiums to only 10 percent today. The study also pointed out that the regulatory environment has provided evolving strength by implementing the necessity of providing adequate margins for adverse circumstances under the NAIC Model Regulations beginning in 2000 and subsequently enhanced in 2009 and 2014.

The journey now standing before us must certainly begin by joining hands with those new friends willing to take that first step on the yellow brick road as we must ask the wizard to help us restore the faith of consumers and agents alike. Together we must recognize that we have indeed survived the flying monkeys and that our strength of purpose to find a home for the risk that will not be ignored was always built upon our brains, our heart and our courage.

Other than that I have no opinion on the subject.”

Filed Under: Helpful Information About LTC, I'll Just Self-Insure, Information About LTC Tagged With: LTCi rate hikes, LTCi Rates, Ron Hagelman, Society of Actuaries

One More Example of Media getting LTCi Very, Very Wrong

September 3, 2016 by Honey 4 Comments

Media ErrorHere’s an example of pundits getting long-term care insurance (LTCi) very, very wrong. Wrong to the point that it is harmful to the public because it dissuades people from considering LTCi by using false information.

The author turned to “one sharp advisor” who is unfortunately not well educated in LTCi and as a result, advised self-insuring. This is bad advice. Too many advisors fail to understand that the primary benefit of LTCi is rapid, worry- and stress-free access to long-term care without hesitation and without fear of threatening the health, financial, or emotional status of their loved ones. “One sharp advisor” and the author do not mention these benefits. All they are concerned about is wealth preservation, which is a secondary consideration.

The author, Richard Eisenberg, also picked an LTCi agent named Irv, to make LTCi recommendations.  Here’s what Irv did wrong.  He said, “…my wife and I would need to spend an hour with him on the phone so he could ask us some questions.” Health questions should never take more than a few minutes…period. They should never be the conversational focus point.  Irv went on to say that “…if I chose to wait five more years to buy the policy he recommended from Mutual of Omaha, I’d be rejected. That company won’t sell long-term care coverage to someone who has had diabetes for 20 years.”  This is a false,  manipulative, scare tactic.  Irv is an embarrassment to my profession.  

Mr. Eisenberg wrote eloquently about why it is very important for him to own LTCi.  I feel sorry for Mr. Eisenberg because of the poor advice that he received from both parties. He is a very smart guy, evidently very in touch with his feelings and the realities of what long-term care entails. I fear that doubt about his decision to abort his search for reasonably priced long-term care insurance will grow through the years and will haunt him during retirement.

The last way to find a good LTCi agent is through direct mail, as Mr. Eisenberg did. Try your friends, colleagues, and the internet first. Visit agent websites before you call. This is how ALL my clients find me.

Wade Pfau, a noted financial advisor with more credentials than “one sharp advisor”, gets LTCi right. Smart financial advisors do.

What a pity. Many people are harmed by published falsehoods about LTCi.

Filed Under: Denial, Elephant in the Room, Helpful Information About LTC Tagged With: False Information, LTCi, Next Avenue, Richard Eisenberg, Wade Pfau

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Honey Leveen, LUTCF, CLTC, LTCP
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Phone: 713-988-4671
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Email: honey@honeyleveen.com

Email: honey@honeyleveen.com

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