LTCI: Inexperience or incompetence?
A story by reporter Darla Mercado about rate hike requests by the two largest providers of long-term-care insurance elicited several comments among readers. Most focused on an explanation offered by one expert as to why the insurers have kept coming back to policyholders asking for higher premiums — inexperience in writing the policies. Most readers were cynical of that explanation, though some were sympathetic.
“The sad fact of the matter here is what is seldom spoken about: These "brilliant' actuaries somehow failed to use gender pricing to determine premiums!! How in the heck did that happen? Life insurance? Gender pricing? Long-term-care insurance? Nah, forget it. It's almost mind-numbing to find a reason why they WOULDN'T do this! Unreal.” — Planner X, MBA, CMFC, CFP
“Inexperience? Not buying it. It was incompetence. Actuaries are pretty smart people, and it's hardly a revelation that interest rates have been largely flat for the last decade or that people are living much longer than 50 years ago. The latter, in particular, is not a new revelation. The insurance companies wanted to sell this product, priced it accordingly and now want regulators to bail them out of their own mess.”
— RON_EDDE
“Odd that the insurers had the inexperience. My wife and I purchased LTC years ago because we realized the low rates were unsustainable. We did the financial calculations in our heads. Why would the insurance companies with their sophisticated cost analyses not have been able to see that their rates barely covered their initial commissions? There is more to this story than is being told. I don't know why the insurance companies priced LTC cheaply as they did, but I do not believe for a moment that "inexperience' had anything to do with it.” — claudew
“Two comments indicate that actuaries should have known that future interest rates were going to be 2%-3% for long-term bonds and 1%-1.5% for intermediate-term bonds for long periods of time. To be able to predict such a thing prior to 2008 would truly have been Nostradamus-like.” — OneFreeThinker
“I think the article fairly describes insurers' problems; there's no hidden agenda here. That said, I think LTC insurance is a dubious product. Uncertain costs, uncertain benefits ... far better for people to save and invest those premiums. Of course, that means no commissions to the vast sales force, which is what's keeping this product line on life support.” — loneMADman
See Page 1 or go to InvestmentNews.com/ltcistory to read the article and comments.
