Report Looks at Why Long-Term Care Insurance Isn't More Popular
Price and complexity are major deterrents to purchasing long-term care insurance, according to a new report . . .Read more
Prudential Financial, Inc., says it will stop selling individual long-term care insurance policies and instead focus on the group sales market.
Prudential, which ranked fifth among individual long-term care insurance carriers in 2011 according to an industry survey, is just the latest major player to exit the market. Last month Unum Group announced it would discontinue sales of long-term care insurance to employees of corporations, and MetLife ended sales of long-term care insurance in late 2010. Other insurers have remained in the long-term care market but have hiked premiums considerably.
Sellers of this type of coverage, which pays for care in nursing homes and, increasingly, at home as well, have been hit particularly hard by the climate of historically low interest rates. The companies’ profits rely on returns from investing policyholder premiums. In addition, policyholders are living longer and fewer are dropping policies midstream than actuaries predicted.
"The decision to exit the individual long term care business reflects the challenging economics of the individual market and our desire to focus our resources and capital on the group market,” Malcolm Cheung, a vice president in Prudential's group insurance unit, said in a statement.
According to the insurance consulting firm LIMRA, 10 out of the top 20 individual writers of long-term care insurance have since exited the market over the last five years. LIMRA says the top five individual carriers in sales for 2011 were Genworth Financial, John Hancock Financial, Mutual of Omaha, Northwestern Long Term Care and Prudential Long Term Care.
Prudential will stop taking applications for individual policies as of March 30, 2012, but said it will continue to honor its existing individual policies.
"As long as premiums are paid on time, and benefits are not exhausted, coverage will remain in place, although premiums can be changed subject to regulatory approval," the company said in its announcement.
Kelly Greene of the Wall Street Journal says that as a result of the retrenchment by large long-term care insurers, consumers should expect higher costs and a tougher approval process. Greene offers tips for dealing with re retrenchment; click here.
To learn more about long-term care insurance, click here.