MetLife recently announced that it will raise its long-term care insurance premiums an average of 18 percent for policyholders who purchased policies from 1998 through 2005 and were younger than 70 when they did so.
MetLife's rate rise comes on the heels of hikes by the other two of the big three long-term care insurers. Last year, for the first time, Genworth Financial said it would raise premiums for existing policyholders. The company filed in all 50 states for premium increases of 8 percent to 12 percent on most of the policies it introduced before 1997. Some of those policies were sold until the early 2000s. The increases affect 45 percent of policyholders. Then in May, John Hancock announced a 14 percent increase in some policies, nearly all of which were issued before 2000.
"In effect," says Chicago Sun-Times columnist Terry Savage, "the insurers are admitting they made a pricing mistake. The only other explanation is that they priced policies artificially low to compete for business."
By way of explanation, MetLife vice president David Acselrod said: "Quite simply, we expect to pay out substantially more in claims than we originally anticipated. Some of the assumptions that drive LTCi pricing include policy lapses, interest rates, the number of people requiring care and the duration of care, to name a few. Following a review of our experience, we concluded that we had to make changes to ensure that we are pricing the products appropriately on behalf of all of our policyholders."
Queries Savage, "Isn't it the job of the insurance company to assess trends that impact pricing before they go to market?"
To read Savage's entire column, click here.
For more on long-term care insurance, click here.