What’s behind the Penn Treaty liquidation?

People are living longer than insurance company banked on

What’s behind the Penn Treaty liquidation?

Life & Health

By Will Koblensky

It’s been a long time coming, but now it’s official.

Penn Treaty Network America Insurance Company and American Network Insurance Company are being liquidated following an announcement from Pennsylvania’s Insurance Commissioner Teresa Miller.

Policyholder claims will get paid through the state guaranty association and are subject to statutory limits.

“After a long and difficult eight-year legal process, the Court’s decision to approve the liquidation recognizes the companies’ financial difficulties are too great to be remedied, and that consumers are best protected through the state guaranty association system,” Commissioner Miller said.

There are 76,000 policyholders affected nationwide, 9,000 of them living in Pennsylvania, according to the commissioner.

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Upwards of 98% of those policyholders are in long term care.

Appropriately, pricing long term care has proven challenging for the insurer as claims have exceeded expectations and investments have yielded low returns.

It seems some insurers may have assumed many policyholders would drop their coverage or not use their benefits: they were wrong.

The result has been significant premium hikes or companies leaving the market.

In this case, it would take a 300% premium increase for Penn Treaty Network America Insurance Company and American Network Insurance Company to balance their books and state regulators wouldn’t let that happen.

“Policyholder claims will continue to be covered by the state guaranty association system pursuant to law, and policy claims will be paid subject to the applicable state guaranty association coverage limit and conditions. Policyholders should continue to file claims as they have been in the past, and must continue to pay their premiums in order to be eligible for guaranty association coverage,” Commissioner Miller said.

“State guaranty associations were created to protect state residents who are policyholders of an insolvent company that has gone out of business. In each state, other insurance companies licensed in that state pay into a guaranty fund, and that money is used to cover claims when a company becomes insolvent and is liquidated.”

The state guaranty association cap, which the premiums will be paid through, in Pennsylvania, is $300,000.


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