Policyholders with long-term care insurance in Maine are having the surprise of their lives; their premiums have significantly increased—up to 58% in one case—after years of steady rates.
The cause of this unfortunate development could be traced to the lack of foresight of the region’s insurers, reported Maine Public Broadcasting.
Maine Superintendent of Insurance Eric Cioppa cited that when long-term care insurance policies were first introduced roughly three or four decades ago, insurers did a poor job pricing them. He said that carriers then incorrectly presumed that interest rates would hold steady.
“They predicted 6-8 percent, and now it’s 4,” Cioppa said.
Cioppa also noted that carriers underestimated how many consumers would let their policies lapse.
The superintendent is looking into developing solutions that will protect the interests of both carriers and consumers.
“We’ve all together lost billions of dollars,” said Genworth CEO Tom McInerny. Genworth, the largest provider of long-term care insurance in the country, posted a $2 billion loss related to long-term care products.
McInerney explained that carriers were given the herculean task of predicting and anticipating interest rates decades in the future. While premiums from older policies have experienced a sharp increase lately, he reasoned that they are still relatively great deals.
“When you look at premiums paid versus benefits you had, it’s usually a factor of six times to ten times what you pay in premiums,” he remarked.” So even with increases it’s still a good deal.”
McInerney believes that long-term care insurance policies issued in the future will likely feature smaller annual premium increases. If you'd like to learn more, read our guide to long-term care insurance.
