Another One Bites the Dust

[Arthur Rudnick]

originally posted by Norwayguy

I beleive the low interest rate environment and low lapse rate are killing things. The carriers know from day 1 what the max

exposure is for LTC claims.

I guess that means when interest rates start to rise, all the carriers will lower their premiums.............

 

[yankee466]

originally posted by Norwayguy



I guess that means when interest rates start to rise, all the carriers will lower their premiums.............

...or put back the full commissions.

 

[Norwayguy]

originally posted by Norwayguy

exposure is for LTC claims.

I guess that means when interest rates start to rise, all the carriers will lower their premiums.............

[/QUOTE]

No, They are not getting the expected return on thier investments. You can't say they don't know thier exposure going is it's X dollars per day or per month plus inflation for the benefit period length.

Are you saying the carriers are raking it in in this low interest rate environment. Cutting products is not limited to LTC carriers are dropping 20 and 30 year term policies discontinueing annuity contracts. So if the interest rate environment isn't affecting things please tell us oh great one what is causing problems.

 

[Arthur Rudnick]

originally posted by norwayguy

Are you saying the carriers are raking it in in this low interest rate environment. Cutting products is not limited to LTC carriers are dropping 20 and 30 year term policies discontinueing annuity contracts. So if the interest rate environment isn't affecting things please tell us oh great one what is causing problems.

Yes, I agree that low interest rates are a problem, but only part of the problem. Low interest rates are a convenient excuse for the carriers to explain higher premiums and/or cutting benefits & comp.

Everyone is aware of low interest rates and it's easy to understand. However, when the actuaries set premiums when interest rates were 5%, 10% & higher, did they expect those rates to last forever? Common sense says that interest rates vary.

As I asked in my previous post; "will they be lowering premiums when interest rates increase"? Of course not.

A lot of this turmoil has to do with shareholders. LTCi has never had a ROI equal to other financial products. For the financial giants (Pru, MetLife, etc) LTCi was a very small part of their total business. Dropping the product was in the company's & shareholders best interests.

The real problem was that for 15 years, the actuaries got it wrong and the industry has been paying for that to this day. It's a combination of things:
1) Low interest rates
2) Incorrect lapse assumptions
3) Higher usage of benefits
4) Longer periods of care

And, to compound everything, all of the above has mandated out-of-control rate increases. At the end of the day, premiums, in many cases are just unaffordable. It's like a death spiral.

 

[Norwayguy]

originally posted by norwayguy



Yes, I agree that low interest rates are a problem, but only part of the problem. Low interest rates are a convenient excuse for the carriers to explain higher premiums and/or cutting benefits & comp.

Everyone is aware of low interest rates and it's easy to understand. However, when the actuaries set premiums when interest rates were 5%, 10% & higher, did they expect those rates to last forever? Common sense says that interest rates vary.

As I asked in my previous post; "will they be lowering premiums when interest rates increase"? Of course not.

A lot of this turmoil has to do with shareholders. LTCi has never had a ROI equal to other financial products. For the financial giants (Pru, MetLife, etc) LTCi was a very small part of their total business. Dropping the product was in the company's & shareholders best interests.

The real problem was that for 15 years, the actuaries got it wrong and the industry has been paying for that to this day. It's a combination of things:
1) Low interest rates
2) Incorrect lapse assumptions
3) Higher usage of benefits
4) Longer periods of care

And, to compound everything, all of the above has mandated out-of-control rate increases. At the end of the day, premiums, in many cases are just unaffordable. It's like a death spiral.

Okay a much better post than mine. I agree totally. I also agree carriers use low interest rate environments to screw agents. A thread over in the annuity section the carriers tell you that not to expect caps on a FIA to rise after issue because they have to lock into long term bond obligtions. Ok I could live with that but that doesn't explain why they continue to drop caps on those existing policies if in fact they have locked into long term bond obligations.

 

[Mr_Ed]

originally posted by norwayguy



Yes, I agree that low interest rates are a problem, but only part of the problem. Low interest rates are a convenient excuse for the carriers to explain higher premiums and/or cutting benefits & comp.

Everyone is aware of low interest rates and it's easy to understand. However, when the actuaries set premiums when interest rates were 5%, 10% & higher, did they expect those rates to last forever? Common sense says that interest rates vary.

As I asked in my previous post; "will they be lowering premiums when interest rates increase"? Of course not.

A lot of this turmoil has to do with shareholders. LTCi has never had a ROI equal to other financial products. For the financial giants (Pru, MetLife, etc) LTCi was a very small part of their total business. Dropping the product was in the company's & shareholders best interests.

The real problem was that for 15 years, the actuaries got it wrong and the industry has been paying for that to this day. It's a combination of things:
1) Low interest rates
2) Incorrect lapse assumptions
3) Higher usage of benefits
4) Longer periods of care

And, to compound everything, all of the above has mandated out-of-control rate increases. At the end of the day, premiums, in many cases are just unaffordable. It's like a death spiral.

there's way too much bullsh*t in this post.

 

[Arthur Rudnick]

originally posted by Mr_Ed

there's way too much bullsh*t in this post.

That adds a lot to this thread...........

 

[ltcadviser]

Okay a much better post than mine. I agree totally. I also agree carriers use low interest rate environments to screw agents. A thread over in the annuity section the carriers tell you that not to expect caps on a FIA to rise after issue because they have to lock into long term bond obligtions. Ok I could live with that but that doesn't explain why they continue to drop caps on those existing policies if in fact they have locked into long term bond obligations.

Insurance companies drop caps and increase spreads on FIA's because its hand holds not only the pencil but also the eraser. And the eraser is protected by the surrender penalty.

 

[Arthur Rudnick]

Insurance companies drop caps and increase spreads on FIA's because its hand holds not only the pencil but also the eraser. And the eraser is protected by the surrender penalty.

Hey, I have a pencil AND an eraser. Can I open up an insurance company?

 

[Mr_Ed]

originally posted by Mr_Ed




That adds a lot to this thread...........

You left out the #1 reason why new policy series are priced higher than the older policy series.