Prudential is exiting the long term care field on 3/31/2012. John Hancock policy owners are realizing a 30-90% rate increase on customers existing policies. What is happening?
1. Insurance companies assumed their reserves would rise at 7.5% per
year. That didn’t happen.
2. They had a lower lapse rate. This means that fewer people dropped
their policies than they expected. For example, they assumed there would be
claims over a 30 year period between 2002 and 2032 of $232MM. Now
they project over the next 20 years (2011-2032) they are projecting $472MM in claims.
We do not recommend against long-term care coverage, but we do recommend that you be aware that what you purchase and what you pay can and likely will change.