John Hancock raising Long Term Care rates 32%

[dgoldenz]

Just a heads up for those considering long term care insurance as I know there have been many threads here on it....starting in June, John Hancock will be raising rates on policies that have a 5% compound inflation rider by approximately 32% across the board, and reducing couples preferred discounts by 5%. No mention of how the change will effect current policyholders (and I'm sure some of you here have JH policies), though hopefully the new increases will allow current policyholders' rates to remain the same.

 

[ziggy29]

Health care economics are flat out broken. There's really no sugar-coating it.

 

[easysurfer]

Thanks for the heads up. You took the question right out of my mouth (how will the change effect current policy holders?).

 

[dgoldenz]

Health care economics are flat out broken. There's really no sugar-coating it.

As noted by JH in their statement, it's very difficult to predict the actual claims of something as new as LTC when costs keep rising and you have a fixed benefit increase every year. I think everyone agrees the system is broken and the costs are spiraling out of control whether it's health insurance or long term care insurance or just flat-out costs paying things in cash. Genworth has not raised rates though, making them that much more competitive unless they end up doing the same thing...

On a side note, they also are discontinuing LTC policies that have a lifetime benefit, likely since the benefit is potentially unlimited. They do claim that less than 4% of all policies sold include a lifetime benefit, probably because they are so expensive.

 

[Nords]

....starting in June, John Hancock will be raising rates on policies that have a 5% compound inflation rider by approximately 32% across the board, and reducing couples preferred discounts by 5%. No mention of how the change will effect current policyholders (and I'm sure some of you here have JH policies), though hopefully the new increases will allow current policyholders' rates to remain the same.

They must have my father under surveillance.

Thanks for the heads up.

 

[ziggy29]

As noted by JH in their statement, it's very difficult to predict the actual claims of something as new as LTC when costs keep rising

True, but unfortunately the industry also encourages young people to "lock in" low rates while they are young, but that sales pitch is hollow when they can and do frequently jack up those "locked in" rates because they lack the ability to properly price it.

In reality, it doesn't appear that *anything* related to health care can be "locked in" indefinitely, because costs *always* rise too much and too quickly.

 

[LARS]

In reality, it doesn't appear that *anything* related to health care can be "locked in" indefinitely, because costs *always* rise too much and too quickly.

Trees don't grow to the moon and neither will healthcare costs. Just a question of when, not if, healthcare costs will be brought under control...

Though I will admit I'm not holding my breath just yet

 

[dex]

Just a heads up for those considering long term care insurance

I think Baby Boomers will be OK; after that who knows.

There will be options for LTC - medicare/medicade, the new health care bill and future expansion. We have gotten our medications (mostly) paid for why does anyone think that baby boomers won't get LTC paid.

There are also, some out of the box options - don't buy health ins and go to jail or commit a non violent crime and go to a minimum security jail. The federal jail system gives very good health care.

 

[Koolau]

True, but unfortunately the industry also encourages young people to "lock in" low rates while they are young, but that sales pitch is hollow when they can and do frequently jack up those "locked in" rates because they lack the ability to properly price it.

In reality, it doesn't appear that *anything* related to health care can be "locked in" indefinitely, because costs *always* rise too much and too quickly.

I had a discussion about LTC premium increases with an agent recently. She kept saying "costs, costs, costs" like some have pointed out here. Then I stopped her in her tracks when I mentioned that policies are written for specified benefits - some with inflation riders, but still "fixed" as far as the benefit is concerned. If LTC patient costs increase 1000% each year, the "cost" to the insurance company is the same e.g., $205/day in 2009 and $215 in 2010 or whatever the policy is written for. These "costs" to the insurance company are known to the penny. These costs do NOT go up.

What the LTC insurers missed was the larger nuber of claims they would actually experience and the number of folks who WOULDN'T lapse their policies before they got old enough to use them. In short, they didn't know what they were doing when they got into the business. Now, the policy holders (yeah, me!) are paying for their incompetence.

 

[dgoldenz]

I had a discussion about LTC premium increases with an agent recently. She kept saying "costs, costs, costs" like some have pointed out here. Then I stopped her in her tracks when I mentioned that policies are written for specified benefits - some with inflation riders, but still "fixed" as far as the benefit is concerned. If LTC patient costs increase 1000% each year, the "cost" to the insurance company is the same e.g., $205/day in 2009 and $215 in 2010 or whatever the policy is written for. These "costs" to the insurance company are known to the penny. These costs do NOT go up.

What the LTC insurers missed was the larger nuber of claims they would actually experience and the number of folks who WOULDN'T lapse their policies before they got old enough to use them. In short, they didn't know what they were doing when they got into the business. Now, the policy holders (yeah, me!) are paying for their incompetence.

From what I am hearing, rates will not be changing for existing policyholders. John Hancock has been much lower priced than other companies for years (except Genworth). You can buy LTC from a mutual company for twice the price, but that's just essentially an already-built-in rate increase. The big problem is people are living much longer than expected and being kept alive by modern medicine. 20 years ago there weren't near as many life-extending medical treatments as there are today. That's another story for another day though...

 

[brewer12345]

The other big driver of LTC policy costs is long term interest rates. It is quite hard for insurers to duration match LTC reserves with really long duration assets, so most of them have asset liability mismatches on LTC blocks. So when rates drop for an extended period, profitability suffers. For new policies, prices have to rise in this interest rate environment, no question.

I think LTC is an immature product that does not really shift the risk from the policyholder. We'll see in 20 years whether this has changed.

 

[mickeyd]

Not at all surprised at this JH increase. They have to make a profit now that they are not a mutual company and ManuLife demands that they produce a profit for the stockholders.

LTC policies will continue to be quite pricey. Consider self insuring for this risk.

 

[dgoldenz]

Not at all surprised at this JH increase. They have to make a profit now that they are not a mutual company and ManuLife demands that they produce a profit for the stockholders.

LTC policies will continue to be quite pricey. Consider self insuring for this risk.

LTC from the mutual companies is about twice the price of JH and Genworth...

 

[brewer12345]

And JH wasn't a mutual for several years before Manulife bought them. Mutuality is irrelevant in this case.

 

[kaneohe]

LTC from the mutual companies is about twice the price of JH and Genworth...

Is there an easy way to find these prices to compare?

 

[dgoldenz]

Is there an easy way to find these prices to compare?

Not really, unfortunately....an agent could run the comparisons, but I don't know of any websites to run them yourself.

 

[Independent]

Not really, unfortunately....an agent could run the comparisons, but I don't know of any websites to run them yourself.

Then how can you make a broad statement like mutual companies charge twice what JH does?

If you've got a spreadsheet, the information on it is public (rates are filed with insurance depts, they aren't trade secrets). Can you post it?

 

[Independent]

I had a discussion about LTC premium increases with an agent recently. She kept saying "costs, costs, costs" like some have pointed out here. Then I stopped her in her tracks when I mentioned that policies are written for specified benefits - some with inflation riders, but still "fixed" as far as the benefit is concerned. If LTC patient costs increase 1000% each year, the "cost" to the insurance company is the same e.g., $205/day in 2009 and $215 in 2010 or whatever the policy is written for. These "costs" to the insurance company are known to the penny. These costs do NOT go up.

What the LTC insurers missed was the larger nuber of claims they would actually experience and the number of folks who WOULDN'T lapse their policies before they got old enough to use them. In short, they didn't know what they were doing when they got into the business. Now, the policy holders (yeah, me!) are paying for their incompetence.

I'll agree with this. Care costs shouldn't be a big driver of premium rates. The mis-pricing of LTC insurance invovled some big errors on lapse rates. I'd thought the lapse assumption has been cleaned up by now. I'd guess that Brewer is right about investment income.

 

[dgoldenz]

Then how can you make a broad statement like mutual companies charge twice what JH does?

If you've got a spreadsheet, the information on it is public (rates are filed with insurance depts, they aren't trade secrets). Can you post it?

Because I sell long term care insurance and have run many comparisons

The rates are public information, but you would still need to get them from somewhere. You can request them from each insurance company based on a given set of parameters, but it's not something you will find posted publicly online unless you are an agent. There are many variables and optional riders with LTC and unless you know what you're looking at, you may not have an apples-to-apples comparison. Companies like Mass Mutual, Guardian, and Northwest Mutual will have much, much higher rates than JH and Genworth.

I'll agree with this. Care costs shouldn't be a big driver of premium rates. The mis-pricing of LTC insurance invovled some big errors on lapse rates. I'd thought the lapse assumption has been cleaned up by now. I'd guess that Brewer is right about investment income.

I think much of mispricing results from errors in calculating how many people will simply die before ever needing care, not necessarily the lapse ratios, though that is part of it. As medical technology gets better, people are kept alive longer and longer as we all know. The LTC policies sold in the 70's and 80's often have MUCH better benefits than those available today at a lower price, so anyone who has one is not going to drop it unless they simply can't afford it.

 

[Nords]

Because I sell long term care insurance and have run many comparisons
Companies like Mass Mutual, Guardian, and Northwest Mutual will have much, much higher rates than JH and Genworth.

Kaneohe's too polite to say that you need to back up your flat assertions with links or data.

Otherwise you're just talking trash. You may be right, but it's still trash.

 

[dgoldenz]

Kaneohe's too polite to say that you need to back up your flat assertions with links or data.

Otherwise you're just talking trash. You may be right, but it's still trash.

On a case we did in November last year. 70 year old male, 63 year old female, assuming perfect health. $4500 monthly benefit, 5% compound inflation rider, 3 year benefit period, shared care rider (if not a standard benefit), 0-day elimination period for home health care, 90 day elimination period otherwise, paid-up survivorship benefit.

Genworth - $5,4xx
John Hancock - $6,3xx
Guardian - $10,2xx

The 5% inflation rider with Guardian (~$4,400/year) was nearly the entire cost of the whole Genworth policy with nearly identical benefits.

 

[JackLenenberg]

Is there an easy way to find these prices to compare?

Yes, it's very easy to compare rates. I have the rates of every company on my computer, and it is as simple as a click of the mouse.

Also, dgoldenz is incorrect that John Hancock has been priced lower than mutual companies for years. 2 mutual companies, Mass Mutual and Guardian--- have better pricing than John Hancock's current rates pre rate increase. Now that John Hancock is increasing its pricing structure, Mass Mutual and Guardian will be significantly less expensive than John Hancock. The only mutual company that was priced higher than John Hancock was Northwestern. John Hancock really hasn't had tremendous pricing since 2000-2002. Genworth is the one company that has had competitive pricing consistantly for the past decade.

John Hancock is revising its pricing on policies opting for 5% compound benefit increases due to the low interest rate environment and the reserve requirements.

It will be interesting to see how Genworth, Mass Mutual, and Guardian react to Hancock's move over the next 2-4 years. Met Life also changed it's pricing on policies including 5% compound increases 1 year ago. So the trend is going in this direction.

It will be also interesting to see how the brokers react because mutual companies like Guardian and Mass Mutual do not pay as high of a commission as companies like Genworth and John Hancock. Genworth of course should beenfit with the brokers, but if consumers are looking to be with A+/A++ companies, Guardian and Mass Mutual should see business pick up. If the brokers, of course, want to take a commission hit.

 

[dgoldenz]

Yes, it's very easy to compare rates. I have the rates of every company on my computer, and it is as simple as a click of the mouse.

Also, dgoldenz is incorrect that John Hancock has been priced lower than mutual companies for years. 2 mutual companies, Mass Mutual and Guardian--- have better pricing than John Hancock's current rates pre rate increase. Now that John Hancock is increasing its pricing structure, Mass Mutual and Guardian will be significantly less expensive than John Hancock. The only mutual company that was priced higher than John Hancock was Northwestern. John Hancock really hasn't had tremendous pricing since 2000-2002. Genworth is the one company that has had competitive pricing consistantly for the past decade.

John Hancock is revising its pricing on policies opting for 5% compound benefit increases due to the low interest rate environment and the reserve requirements.

It will be interesting to see how Genworth, Mass Mutual, and Guardian react to Hancock's move over the next 2-4 years. Met Life also changed it's pricing on policies including 5% compound increases 1 year ago. So the trend is going in this direction.

It will be also interesting to see how the brokers react because mutual companies like Guardian and Mass Mutual do not pay as high of a commission as companies like Genworth and John Hancock. Genworth of course should beenfit with the brokers, but if consumers are looking to be with A+/A++ companies, Guardian and Mass Mutual should see business pick up. If the brokers, of course, want to take a commission hit.

I get paid within 5% of each other for Guardian and JH/Genworth....a good agent will place the business with the company that fits best regardless of commission anyway. How are you coming up with rates for Guardian lower than a comparable policy with John Hancock? The base rates may be similar, but add on a few of the important benefit riders and the Guardian price goes through the roof. See the example I posted and re-run it yourself.

Also, you having the rates on your computer doesn't help the average consumer find instant quotes online without talking to an agent first. That said, LTC is a complicated product and your average consumer shouldn't be setting up their own policies anyway.

 

[JackLenenberg]

On a case we did in November last year. 70 year old male, 63 year old female, assuming perfect health. $4500 monthly benefit, 5% compound inflation rider, 3 year benefit period, shared care rider (if not a standard benefit), 0-day elimination period for home health care, 90 day elimination period otherwise, paid-up survivorship benefit.

Genworth - $5,4xx
John Hancock - $6,3xx
Guardian - $10,2xx

The 5% inflation rider with Guardian (~$4,400/year) was nearly the entire cost of the whole Genworth policy with nearly identical benefits.

While, in this scenario what dgoldenz is asserting is technically correct, the comparison is slanted to what the Genworth Privileged Choice policy does very well....which is offer bells and whistles such as shared care, spousal survivorship, and a 0 day home care elimination period very inexpensively. For this reason, Genworth is really always an excellent choice. However, this is not the design that would favor Guardian. The actuary behind Guardian's product, Jim Glickman, prices 0 day HHC EP, and Spousal Survivorship, and shared care very high. Especially the survivorship feature.

Guardian's price for a married couple age 70/63 in excellent health $4500/mo., 5% compound, 90 day wait, 3 years each $4926, 4 years each $5829, 5 years each $6732, 6 years each $6979. Guardian's pricing is actually fine. It's probably a little better for clients in their fifties, than clients in their seventies. And the Guardian product does a lot of things well----competitive for Unlimited benefits, 10 pay funding, and wide selection of inflation options. One must, however, recognize what is driving up the price in dgoldenz example above. It's not the core benefits. It's the fluff. A client may not want the fluff. They may just want to know what the money costs. Genworth sells the fluff cheap.

Yesterday, I had a couple in my office in their 50's. Interestingly, they were also looking at $150.00/day, 6 years shared benefits, with compound inflation. Of 14 companies, Genworth was the cheapest, Guardian was the second cheapest. And it was close. But Genworth is an A rated company, and Guardian is A++ and Guardian has never had a rate increase on in-force business unlike Genworth and John Hancock. They may choose Guardian. They may choose Genworth. Probably will choose Genworth. I will write whichever company they prefer, but it is silly to slant a comparison the way dgoldenz did above, with Survivorship and 0 day HHC EP driving up Guardian's price. If Guardian can sell that same couple 6 years each of benefits for $6900, why would I lead a client to believe that the cost of 6 years only to share is $10200? It's not fair to the client to not have transparency.

If I want to buy a car and am comparing Accords and Camrys, and Honda wants to give me a 6 disc CD changer, while Honda wants to charge me $4000 for the item, it doesn't mean the Accord is an expensive car. It just means that if I feel I like the ride of the Accord better, I probably won't include the 6 disc cd changer.

 

[JackLenenberg]

I get paid within 5% of each other for Guardian and JH/Genworth....a good agent will place the business with the company that fits best regardless of commission anyway. How are you coming up with rates for Guardian lower than a comparable policy with John Hancock? The base rates may be similar, but add on a few of the important benefit riders and the Guardian price goes through the roof. See the example I posted and re-run it yourself.

Also, you having the rates on your computer doesn't help the average consumer find instant quotes online without talking to an agent first. That said, LTC is a complicated product and your average consumer shouldn't be setting up their own policies anyway.

I already know what drives up Guardian's price and I responded. It just depends where one wants to take the conversation with a client. The Genworth Privileged Choice policy is the best value in the country. I know this, and write it for most of my clients. But I also want to be fair to Guardian and Mass Mutual. Neither sells optional riders cheaply. Just like John Hancock does not sell Unlimited benefit models cheaply. Just like Met Life does not sell compound inflation cheaply. To insinuate that John Hancock is always overpriced because it does not want the Unlimited business would be unfair as well. But don't slant the picture for Mass Mutual and Guardian because you feel the bells and whistles are critical.