After discussions and emails with a lot of agents who "specialize" in LTC insurance, I've come to realize that most insurance agents believe that insurance companies are losing money on LTC insurance.
Not a single insurance company has lost money on LTC insurance (except for Penn Treaty--but there's no surprise there).
The reason many companies don't sell LTCi anymore (e.g. Pru, Met) is because they were not making enough money on it. (Why keep a product line that generates single digit profits when you can use your company resources to expand product lines that generate double digit profits.)
Even GNW is not losing money on their LTCI block when taken as a whole.
There are portions of it (primarily the pre-1994 policies) on which they are losing money. They are breaking even on the policies sold after 1994 and before Rate Stability (i.e. 2001-ish). And they are making money on the post-Rate Stability policies (i.e. 2002 to present).
And, there are even some companies for whom claims are much lower than they projected and their profits are considerably higher than expected. (fyi... the claims data is public information available through the NAIC).
Here's what most agents don't seem to understand: when an insurance company gets a rate increase approved, it does not mean that the insurer is losing money, it means that their experience is bad enough on the block to justify a regulatory increase.
On pre-rate stability policy forms, the carriers were allowed, in most cases, to price the exact same profit levels in the increase as they had in the initial filing. Therefore, they made money ON the increase as well as on the initial filing.
On post-rate stability policy forms, the carriers are not allowed to price "normal profit levels" into the rate increase. However, they still have profit priced into the initial rate filing.
I'm sure I'll get lots of grief for posting this because this is just the opposite of what most of you have been told by your uplines. But what else is new... everybody who participates in this forum disagrees with me on nearly all points.
Not a single insurance company has lost money on LTC insurance (except for Penn Treaty--but there's no surprise there).
The reason many companies don't sell LTCi anymore (e.g. Pru, Met) is because they were not making enough money on it. (Why keep a product line that generates single digit profits when you can use your company resources to expand product lines that generate double digit profits.)
Even GNW is not losing money on their LTCI block when taken as a whole.
There are portions of it (primarily the pre-1994 policies) on which they are losing money. They are breaking even on the policies sold after 1994 and before Rate Stability (i.e. 2001-ish). And they are making money on the post-Rate Stability policies (i.e. 2002 to present).
And, there are even some companies for whom claims are much lower than they projected and their profits are considerably higher than expected. (fyi... the claims data is public information available through the NAIC).
Here's what most agents don't seem to understand: when an insurance company gets a rate increase approved, it does not mean that the insurer is losing money, it means that their experience is bad enough on the block to justify a regulatory increase.
On pre-rate stability policy forms, the carriers were allowed, in most cases, to price the exact same profit levels in the increase as they had in the initial filing. Therefore, they made money ON the increase as well as on the initial filing.
On post-rate stability policy forms, the carriers are not allowed to price "normal profit levels" into the rate increase. However, they still have profit priced into the initial rate filing.
I'm sure I'll get lots of grief for posting this because this is just the opposite of what most of you have been told by your uplines. But what else is new... everybody who participates in this forum disagrees with me on nearly all points.
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