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MetLife Stops Selling LTC as of 12/30/10
Old 11-11-2010, 03:20 PM   #1
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MetLife Stops Selling LTC as of 12/30/10

Notice was sent to brokers yesterday, but can't be distributed for public use. If anyone here has a MetLife policy, either group or individual, you will probably get a letter about it in the mail.
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Old 11-11-2010, 03:57 PM   #2
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It was reported already by thestreet.com, and at the Bogleheads Forum, unless you are referring to a more proprietary type of notice.
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Old 11-11-2010, 03:59 PM   #3
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I hadn't seen it anywhere else. Thanks for the links.
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Old 11-12-2010, 02:36 PM   #4
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IMO, this is a big deal. I considered MetLife a leader in this product line. I heard that Transamerica was going to try to get back in.
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Old 11-12-2010, 03:51 PM   #5
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Will MetLife try to sell their current book, or just let it run off?

Ha
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Old 11-12-2010, 06:19 PM   #6
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Will MetLife try to sell their current book, or just let it run off?

Ha
From what I recall they would keep existing policies - but expect rate increases.

DD
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Old 11-12-2010, 11:30 PM   #7
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From what I recall they would keep existing policies - but expect rate increases.

DD
For now...
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Old 11-13-2010, 06:07 AM   #8
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Some other insurance companies have exited the market in the last few years.

Bottom line... they want to make a certain predictable profit margin. If they have trouble predicting then they lower risk by jacking up premiums. When the premiums increase, the market gets smaller because some people exit the plan.


I suspect the financial crisis and the economy has caused an increase in the ratio of people who will file a claim to those that will not due to anti-selection. People who are healthy drop the policy (as prices rise) and the sick keep it. Companies that priced their products wrong are probably feeling the sting.

This financial crisis is shaking out the dead wood!

In some ways, the bigger the pool, the lower the cost (assuming little anti-selection). 2 or 3 large carriers would be more optimum... larger pool to spread the risk. But there is often a problem with oligopolies over charging.

No matter what the cause... insurance companies need to be able to reliably project profitability and make a profit on the product line.

In the end... I think the government will have to create a private industry catastrophic back stop (like flood insurance) to make it a viable private industry. This would also lower premium prices and consequently increase LTC insurance participation.

For example: Private insurance is capped at $250k (indexed to general inflation). A govt fund picks up the slack. Insurance companies contribute some premium to the govt fund. It would have to be tightly regulated with very strict risk based capital requirements to ensure an insurance company did not game the system and make a bunch of cash and then exit or leave the govt to pay for it. All of this could be effectively regulated.

There are 2 basic things that need to be established to make LTC Insurance work for everyone:

  1. Insurance company profit with manageable risk to them
  2. Affordable premium to increase participation such that there is a large pool of participant (with little ability for anti-selection).

They could deal with anti-selection using a Single Premium approach. You get a physical and medical checks. You undergo risk based underwriting and are rated somehow. Then you payup the full amount (like an annuity SP).... no backing out. The problem with this idea is that it would reduce the number of participants. Many more people can pay a payment monthly/yearly than can product a large Single Premium (e.g. $100k in current $).

But if the LTC were a catastrophic policy... for example: the insure bears the cost of the first year (about $100k) and the insurance company picks up the 2nd year forward... the premium cost would probably be reduced significantly. This might allow a single premium approach (no backing out) to work due to a smaller payment. But it would still be a substantial payment.
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Old 11-13-2010, 09:41 AM   #9
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I thought the Health Care Reform bill contained some sort of LTC component that would kick in after 5 years of w%rk.

DD
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Old 11-13-2010, 09:58 AM   #10
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Originally Posted by chinaco View Post
...

They could deal with anti-selection using a Single Premium approach. You get a physical and medical checks. You undergo risk based underwriting and are rated somehow. Then you payup the full amount (like an annuity SP).... no backing out. The problem with this idea is that it would reduce the number of participants. Many more people can pay a payment monthly/yearly than can product a large Single Premium (e.g. $100k in current $).

But if the LTC were a catastrophic policy... for example: the insure bears the cost of the first year (about $100k) and the insurance company picks up the 2nd year forward... the premium cost would probably be reduced significantly. This might allow a single premium approach (no backing out) to work due to a smaller payment. But it would still be a substantial payment.
DH & I purchased a rated, compound index @ then 90% of cost of care, no limit term, joint 10-year paid up with a 90 day wait for a total of ~ $40,000 in our mid 50s (15 years ago) from a well known insurer. I hope their actuaries were spot on as, God willing, it will take us years before we file a claim.
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Old 11-13-2010, 10:14 AM   #11
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My wife and I bought Metlife LTC policies in 2004. I was 55 and she was 53. Premiums were not increased until this year. We have the inflation option on both policies. They gave us the option of keeping the premiums at existing levels if we reset the daily benefit back to 2005 levels. We chose to accept the premium increase to maintain the inflation adjusted benefits.

I certainly hope that Metlife does not cancel our policies. Our premiums are relatively low due our age when we started the policies.
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Old 11-13-2010, 11:18 AM   #12
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DH & I purchased a rated, compound index @ then 90% of cost of care, no limit term, joint 10-year paid up with a 90 day wait for a total of ~ $40,000 in our mid 50s (15 years ago) from a well known insurer. I hope their actuaries were spot on as, God willing, it will take us years before we file a claim.

Was this a Life Insurance Policy with a rider or some type of LTC insurance?

The 90%... is that 90% of cost of care when the care is received... or in dollars today?
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Old 11-13-2010, 11:51 AM   #13
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This is a LTC policy, no life insurance at all. Allianz

We choose the daily rate the policy pays, it could have been anything so long as it wouldn't exceed the cost of care. The cost of the policy is based, in substantial part, to the daily rate selected at the time the policy is written. The policy adjusts the daily rate paid on its anniversary date 5%, compounded.

The policy pays a % of the daily rate in effect at the time care is received for in home care and assisted living. I would need to pull out the policy to provide specifics.

I think one of the factors in the rating is that it is for a couple. They probably factor in the fact that the healthier spouse cares for the sicker one at home for as long as possible.
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Old 11-13-2010, 11:53 AM   #14
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I thought the Health Care Reform bill contained some sort of LTC component that would kick in after 5 years of w%rk.

DD
It does, (you can Google "CLASS Act" for more on it). It's an optional program, the benefits are fairly low (IIRC $50 per day), and no one is sure what the premiums will be. It's supposed to be self-funded and have no underwriting, so I'm guessing it will either:
1) Have really high premiums due to adverse selection or
2) Have reasonable premiums but the taxpayer will end up soaked for a huge bill down the road.

The controversial part is that all the premiums collected are counted as "reducing the cost of health care" and served to reduce the overall price of the healthcare law, but the very large subsequent liability for all that upcoming LTC was pretty much beyond the 10 year window used by the CBO in their calculations of the cost of the bill. So, some view it as more of a way to hide the true cost of the legislation than a meaningful LTC initiative.
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Old 11-13-2010, 12:37 PM   #15
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This is a LTC policy, no life insurance at all. Allianz

...

Thanks for the information. I looked on their site and could not find much reference to an LTC policy except maybe in NY.

I did see a news article that indicated they exited the LTC business about a year ago.

http://www.investmentnews.com/articl.../REG/311089976


The only type of LTC product I saw was an LTC accelerated benefit rider on a Life Policy that allows some of the life benefit to be used for LTC.
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Old 11-13-2010, 07:01 PM   #16
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Originally Posted by chinaco View Post
Some other insurance companies have exited the market in the last few years.

Bottom line... they want to make a certain predictable profit margin. If they have trouble predicting then they lower risk by jacking up premiums. When the premiums increase, the market gets smaller because some people exit the plan.


I suspect the financial crisis and the economy has caused an increase in the ratio of people who will file a claim to those that will not due to anti-selection. People who are healthy drop the policy (as prices rise) and the sick keep it. Companies that priced their products wrong are probably feeling the sting.

This financial crisis is shaking out the dead wood!

In some ways, the bigger the pool, the lower the cost (assuming little anti-selection). 2 or 3 large carriers would be more optimum... larger pool to spread the risk. But there is often a problem with oligopolies over charging.

No matter what the cause... insurance companies need to be able to reliably project profitability and make a profit on the product line.

In the end... I think the government will have to create a private industry catastrophic back stop (like flood insurance) to make it a viable private industry. This would also lower premium prices and consequently increase LTC insurance participation.

For example: Private insurance is capped at $250k (indexed to general inflation). A govt fund picks up the slack. Insurance companies contribute some premium to the govt fund. It would have to be tightly regulated with very strict risk based capital requirements to ensure an insurance company did not game the system and make a bunch of cash and then exit or leave the govt to pay for it. All of this could be effectively regulated.

There are 2 basic things that need to be established to make LTC Insurance work for everyone:

  1. Insurance company profit with manageable risk to them
  2. Affordable premium to increase participation such that there is a large pool of participant (with little ability for anti-selection).

They could deal with anti-selection using a Single Premium approach. You get a physical and medical checks. You undergo risk based underwriting and are rated somehow. Then you payup the full amount (like an annuity SP).... no backing out. The problem with this idea is that it would reduce the number of participants. Many more people can pay a payment monthly/yearly than can product a large Single Premium (e.g. $100k in current $).

But if the LTC were a catastrophic policy... for example: the insure bears the cost of the first year (about $100k) and the insurance company picks up the 2nd year forward... the premium cost would probably be reduced significantly. This might allow a single premium approach (no backing out) to work due to a smaller payment. But it would still be a substantial payment.
My former employer is raising rates and getting out (a smaller player than MetLife). A former co-worker tells me the biggest concern was generally higher than anticipated claims in the 80's for the industry as a whole. It takes a long time for LTCi experience to develop because most people buy when they are in their 60's but most claims come in 20 years later.

I know that when I was working there we thought we had premium rates which covered the likely long term claims experience plus a margin for error.

LTCi is very sensitive to interest rates due to the long period between issues and claims. It's possible that the company thinks they are in for an extended period of low rates.

Gov't run excess risk reinsurance is an interesting idea. I'm sure the gov't doesn't want to pay for all the long term care that an aging population could use. I also expect the gov't would much prefer a private market as long as there are at least a few active writers.
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Old 11-13-2010, 11:17 PM   #17
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The controversial part is that all the premiums collected are counted as "reducing the cost of health care" and served to reduce the overall price of the healthcare law, but the very large subsequent liability for all that upcoming LTC was pretty much beyond the 10 year window used by the CBO in their calculations of the cost of the bill. So, some anyone with a calculator will view it as more of a way to hide the true cost of the legislation than a meaningful LTC initiative.
There, fixed that one for 'ya too


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Old 11-14-2010, 07:22 PM   #18
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Some other insurance companies have exited the market in the last few years.

Bottom line... they want to make a certain predictable profit margin. If they have trouble predicting then they lower risk by jacking up premiums. When the premiums increase, the market gets smaller because some people exit the plan.
.
I spoke with the head actuary of a large insurance company who recently stopped offering LTC.

He said other the drop off in long term interest rates, the largest factor that caused them to exit the business was that the persistency of LTC policies has been off the charts which they didn't plan for.
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Old 11-14-2010, 07:57 PM   #19
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I spoke with the head actuary of a large insurance company who recently stopped offering LTC.

He said other the drop off in long term interest rates, the largest factor that caused them to exit the business was that the persistency of LTC policies has been off the charts which they didn't plan for.
I saw that in an article on Genworth LTC policies.

They did such a good job of frightening convincing people to get these that folks are afraid to abandon the policies. More afraid than they had calculated. It's interesting that the profitability of these depends on a certain number of folks abandoning the policies before needing them.
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Old 11-15-2010, 06:06 AM   #20
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I saw that in an article on Genworth LTC policies.

They did such a good job of frightening convincing people to get these that folks are afraid to abandon the policies. More afraid than they had calculated. It's interesting that the profitability of these depends on a certain number of folks abandoning the policies before needing them.
Thanks for posting this--I had a read a reference to this issue, but interesting to see it from the "horse's mouth". The best word I can think to describe this, is "troubling". As you pointed out, on one hand, Genworth has a sales force encouraging people to buy these policies, and on the other hand, the pricing set by the actuaries assumes (hopes?) that a certain number of folks will abandon their policies. I understand that there will be a sort of natural "attrition" for any product bought over time, but it just rubs me the wrong way that this is part of the business model--success/profitability is predicated on how many people abandon thier policies before Genworth has to payout any benefits.
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