Another Wake Up Call to Long-term Care Insurers: Are They Listening?

Back in August (see 8/23 post) I submitted a post wondering when the major long-term care insurance carriers were going to wake up. For more than a decade, there have been recurring exposes by major news outlets about unscrupoulos sales tactics by a few carriers. Aggressive and misleading sales tactics, bogus credentials used by many agents to mislead consumers about their expertise, refusing to pay many legitimate claims when the polcicy holder needs benefits to pay for care, and unconscionable rate increases that made the polcies unaffordable after the policy holders had paid premiums they were told would never increase. Each time one of these scandals erupts it seems like the same sleazy companies, namely Penn Treaty and Conseco and a few others are the culprits.

There are many reputable carriers that have sold long-term care insurance for years and have never raised rates on existing policyholders. These include Prudential, John Hancock, MetLife and others, all of whom are highly rated carriers by the major independent rating agencies.

Instead of working with the state insurance commissioners who regulate these policies and also approve rate increases, to shut down those insurers who continue to prey on vulnerable elders, they stand by and let their own reputations be sullied by the dregs of the industry.

Now Congress is demanding reforms and will be placing the sales of long-term care polcies under closer scrutiny. (Where have they been for the past 15 years?)

Senator Charles E. Grassley.(R) of Iowa, the top-ranking Republican on the Senate Finance Committee has asked 11 long-term care insurance companies to explain “troubling data” regarding how policyholders’ claims are handled and paid.

Grassley cited data collected by the National Association of Insurance Commissioners, which indicated that nationwide complaints about long-term care insurance rose 92 percent from 2001 to 2006. The data also indicated that complaints involving claim denials resulted, in a majority of cases, in reversals that favored consumers.

In March of this year,The New York Times reported that some long-term care insurers had established procedures that made it difficult, if not impossible, for some policyholders to be paid. That article, which focused on Conseco and Penn Treaty, was mentioned by Senator Grassley in his letters to insurers and by the House Committee on Energy and Commerce when it started a similar investigation in May.

Genworth, the nation’s largest provider of individual long-term care policies, and generally regarded as a reputable carrier and a pioneer in the industry, said last month that it would raise premiums by as much as 12 percent for some policyholders, the first such increase in the company’s history.

Genworth Financial, in a statement, said the company intended to cooperate fully with Senator Grassley’s request. Conseco and Penn Treaty declined to comment or return phone calls.

With the Baby Boom generation reaching the age of 60 at a rate of about one every 60 seconds for the next 20 years, and state and local governments too deep in debt to meet their current levels of subsidizing care for older Americans, LTC Insurance is not just another insurance product, it's a critical national public policy issue.

Yet because the industry continuously stumbles over its own feet with crude and grossly outdated marketing methods, and corporate strategies that hinder sales growth instead of adopting radically innovative new marketing methods, sales of these policies, which should be skyrocketing, have been falling for the past 5 years.

Albert Einstein once said “The definition of insanity is doing the same thing over and over again and expecting different results”. Perhaps the more reputable and highly rated carriers might think about this quote for even a few seconds and ask, does this quote apply to the way we run your company?

Comments from readers are encouraged. Post them here or contact Bob O'toole at bob@elderlifeplanning.com



To read the most recent article on this issue from the NY Times earlier this week go to http://www.nytimes.com/2007/10/03/business/03care.html?_r=1&adxnnl=1&oref=slogin&ref=policy&adxnnlx=1191621646-dLmlNG9d6FgYhypCOytHLg&pagewanted=print