MetLife, which had been one of the largest providers of long-term care insurance, recently announced that it will stop selling both group and individual policies. New employees will not be able to purchase a MetLife long-term care policy starting in 2011, even if their employer has an existing group policy. The company will, however, continue to service the 600,000 policies that are currently in force. “Assumptions used to price our long-term care insurance products initially have changed,” says MetLife spokeswoman Karen Eldred. In essence, fewer people have dropped their policies than originally anticipated, and the remaining policyholders are living longer — and claiming benefits longer. The prospect of more and costlier claims drove MetLife out of the market.
MetLife’s decision came as no surprise to insurance insiders. “About two years ago, the company repriced its individual long-term care products to cost more than 50 percent more than the competition,” says Murray Gordon, CEO of Maga Ltd., a long-term care broker in Riverwoods, Ill. “Its market share has been in free-fall ever since.”
MetLife is not alone. Many insurers have been hard hit by the open-ended expense of providing lifetime benefits to an aging population with an increasingly long life expectancy (several insurers recently stopped selling policies with lifetime benefits). Meanwhile, low interest rates make it tougher for insurers to make up for pricing mistakes with their own investments.
Several insurers have already stopped selling long-term care insurance. “Major companies that have exited the marketplace have continued to service policyholders,” says Gordon. “There has been no change in claim handling or other service issues.” In some cases, insurers sold their long-term care business to another insurer (Eldred says MetLife has no plans to sell its LTC business). But, says Gordon, even when another carrier assumed an insurer’s block of business, “the only thing that changed was the name of the company.
As Gordon points out, existing MetLife policyholders are paying higher premiums, too. Since 2008, MetLife has received approval for rate increases of 9 percent to 18 percent in most states. MetLife is also increasing rates for policies it acquired in 2005 from the Travelers Insurance Co. Rate increases of 10 percent to 44 percent have been approved or are pending on those policies. And the insurer plans to ask regulators soon for a rate increase for its group long-term care insurance plans, which haven’t faced a rate increase yet.
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