dcsimg The Get Rich Slowly Forums • View topic - Long term care insurance

  GRS Home  Forum Home
Bank Rates Center
   Savings Account Rates
   Money Market Rates
   Highest CD Rates
Insurance Rates Center
  Auto           Health
   Life              Home
Mortgage Rates Center
  Mortgage Rates
  Mortgage Quotes

Last visit was:
A place for Get Rich Slowly readers to ask questions
and exchange ideas
It is currently Fri Oct 31, 2014 8:26 pm




Post new topic Reply to topic  [ 40 posts ]  Go to page Previous  1, 2, 3
Author Message
 Post subject: Re: Long term care insurance
PostPosted: Tue Jun 19, 2012 2:08 pm 

Joined: Sat Jun 16, 2012 8:06 am
Posts: 99
>>when the insurance companies (LTC or otherwise) run into trouble, they may go bankrupt, lower payouts, or possibly return the premiums of supposedly insured people and consider that as a satisfaction of all obligations.>>

Let's not confuse deregulation of banks with the heavily regulated insurance industry. A lot of people do this, and it's understandable, but they are two very different "beasts".

1) Go bankrupt: Hartford Life came close during the market chaos in 2008, but 'bankrupt' for insurers is not quite the same as bankrupt pension funds or corporations. You might already know this, but I'll outline it below in general, for those who aren't familiar with how insurance is funded/regulated.

As has been pointed out on this board in another thread, premiums are not what pay claims. It's investments that are used to pay claims. Every policy sold MUST have a cash reserve percentage set aside in liquid instruments. States manage the guaranty funds which are used to repay policyholders IF a liquidated company's assets (RE, investments, and the cash reserves) are insufficient to cover claims on the different lines of business the insurer was in.

I can only recall two insurers (non-LTC) which have been liquidated in recent (regulated) US history: MONY and Equity Benefit Life. In MONY's case, policyholders were paid lump sums calculated at PVFP (Present Value of Future Profits). My FIL, a worker at Mead Paper, received such a lump sum in lieu of an expected annuity, when Mead went under and then MONY was liquidated a few years later.

In EBL's case, it was caused by fraud, not against policyholders, but against reinsurers, one of the first big B2B fraud cases. Legitimate policyholders had their policies transferred to another insurer willing to buy the business, and no financial losses were suffered by any consumers.

2) Return of premiums: It's possible, but not usually done. I've never heard of it being done, but perhaps you have; I haven't paid close attention to this specific issue. Usually what happens is that the insurer simply "closes" the book of business, similar to the way a fund will "close" to new investors. Because 80% of costs are incurred on booking new business, eliminating new applicants is the preferred method of eliminating a profit drain, on ANY book of business, LTC or non-LTC.

Met Life, for example, in withdrawing from the LTC market in 2010, merely stopped writing any new LTC. All current LTC policies remain in force with original benefits, with no changes.

Of course, this doesn't prevent class-wide premium increases, which must be approved by the State Dept. of Insurance commissioner, in the state in which the insurer is doing business. That's why I pointed out that back in 1999, I thought the old actuarial tables were flawed when it came to the Boomer generation, and that I expected price increases. But because we bought LTCi before "conventional wisdom" suggested, our premiums were very affordable then, and remain affordable still.

We also have one advantage I didn't mention above. Our LTCi was sponsored at the time by our state pension fund. Once the IRS approved Partnership LTCi, the 'book of business' our policy is under, was closed to new applicants. The LTC insurer is a "captive" insurer: they cannot withdraw from supporting the closed book of policies unless the pension fund can find a replacement insurer. It isn't a large number of LTCi –less than 20,000 policies total.

3) Reduce payout. Didn't mean to take these out of order! I realized that the Pennsylvania Dept. of Insurance settlement with Conseco applies here. Conseco sold LTCi under six different subs. All had very high #s of complaints against them. The settlement (which took years to negotiate) has all LTCi policies with Conseco/subs aggregated and paid from an independent trust funded by Conseco.

Whether the $215M that funds the trust is sufficient to cover the 14,000 policies – no one can be sure about that. From an actuarial standard, not all policyholders will file claims, and of those that do, it's a guess as to how long benefits will need to be paid. We also don't know how many of those policies were for set periods (3 yr, 5 yr, etc.) or for unlimited periods.


Top
Offline Profile E-mail   
 Post subject: Re: Long term care insurance
PostPosted: Tue Jun 19, 2012 2:25 pm 
Moderator

Joined: Wed Sep 23, 2009 9:01 am
Posts: 5398
jaiko wrote:
That's why I pointed out that back in 1999, I thought the old actuarial tables were flawed when it came to the Boomer generation, and that I expected price increases. But because we bought LTCi before "conventional wisdom" suggested, our premiums were very affordable then, and remain affordable still.

We also have one advantage I didn't mention above. Our LTCi was sponsored at the time by our state pension fund. Once the IRS approved Partnership LTCi, the 'book of business' our policy is under, was closed to new applicants. The LTC insurer is a "captive" insurer: they cannot withdraw from supporting the closed book of policies unless the pension fund can find a replacement insurer. It isn't a large number of LTCi –less than 20,000 policies total.


I think you have a great deal. I probably would buy LTC if I had the opportunity again under the conditions and prices that you have it. But that ship has sailed. My own analysis led me to conclude that the current offerings are not attractively priced.

As for insurance company failures, I don't think that anyone can predict the likelihood of future failures or even the impact. Not so long ago it was often stated that there had never been a municipal default in the United States. That's no longer true. Were it not for a bailout, AIG would have failed. And from what were here of their leverage and derivative obligations, the insurance assets would have been tied up for decades. That is likely one reason they were bailed out. Creditors may not have been able to reach the underlying assets but they could have potentially prevented AIG from ever paying out benefits.

I just don't think anyone can say with certainty that a given insurance company is solid and I don't think the average person has any basis for knowing that. Ratings used to mean something but no longer do in my opinion. I'd just be very reluctant to base any long term need on an insurance company's health. I have car, home and health insurance among others cover. But those dependencies only require I have visibility of the company health for a year or two. With most life or LTC insurance I'd need to be assured that the company would be healthy for decades. I just don't think that is realistic any more.


Top
Offline Profile E-mail   
 Post subject: Re: Long term care insurance
PostPosted: Fri Jun 29, 2012 10:17 pm 

Joined: Fri Jun 29, 2012 7:35 pm
Posts: 5
Long term care insurance is not for everyone. Most experts suggest this is a wise health investment for people who are earning average income because they cant qualify for medicaid benefits and they cannot self-insure due to the high rates of facilities.
it's important to weigh the pros and cons of [spam link removed] long term care plan before buying it on your own to avoid becoming bankrupt


Top
Offline Profile E-mail   
 Post subject: Re: Long term care insurance
PostPosted: Fri Jun 29, 2012 10:34 pm 

Joined: Fri Jun 29, 2012 7:35 pm
Posts: 5
most people thought[spam link removed]long term care plan is impractical, but allowing your savings become swept by expensive health care costs is a lot more impractical and dangerous.

this type of insurance is not a one-size-fits-all since it's not for everyone.


Top
Offline Profile E-mail   
 Post subject: Re: Long term care insurance
PostPosted: Wed Jul 04, 2012 9:08 am 

Joined: Sat Jun 16, 2012 8:06 am
Posts: 99
>>Were it not for a bailout, AIG would have failed. And from what were here of their leverage and derivative obligations, the insurance assets would have been tied up for decades.>>

Not true from what I understood. One PART of AIG was in danger of failing, but NOT the insurance business itself, which is a huge (and widely acknowledged) "cash cow". That's why it's never difficult to find another carrier to buy a block of business. All the expensive up-front underwriting and sales costs have long run off, the required insurance reserve $$$ are already booked and can be easily transferred, and the premiums coming in are 99.9% profit.

That was why the AIG CEO was so resistant to the idea of selling off the insurance business. It was and still is, the major source of ready, continuing cash flow.

It's why you see different businesses under one holding company. The CDL segment COULD NOT touch the insurance/annuity funds.


Top
Offline Profile E-mail   
 Post subject: Re: Long term care insurance
PostPosted: Wed Jul 04, 2012 9:24 am 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1201
jaiko wrote:
>>Were it not for a bailout, AIG would have failed. And from what were here of their leverage and derivative obligations, the insurance assets would have been tied up for decades.>>

Not true from what I understood. One PART of AIG was in danger of failing, but NOT the insurance business itself, which is a huge (and widely acknowledged) "cash cow". That's why it's never difficult to find another carrier to buy a block of business. All the expensive up-front underwriting and sales costs have long run off, the required insurance reserve $$$ are already booked and can be easily transferred, and the premiums coming in are 99.9% profit.

That was why the AIG CEO was so resistant to the idea of selling off the insurance business. It was and still is, the major source of ready, continuing cash flow.

It's why you see different businesses under one holding company. The CDL segment COULD NOT touch the insurance/annuity funds.

While what you say is probably true, did you factor in the fact that AIG writes most of the PMI?


Top
Offline Profile E-mail   
 Post subject: Re: Long term care insurance
PostPosted: Thu Jul 05, 2012 1:01 pm 

Joined: Sat Jun 16, 2012 8:06 am
Posts: 99
>>did you factor in the fact that AIG writes most of the PMI?>>

??? I still fail to see what that has to do with AIG's life and annuity business. That market segment is ENTIRELY SEPARATE from the other AIG units. The life and annuity books of business are extremely valuable and any large insurer would love to snatch it off the market if AIG was ever stupid enough (or forced to) sell it.

We should apologize to the OP, the AIG postings have nothing to with LTCi.


Top
Offline Profile E-mail   
 Post subject: Re: Long term care insurance
PostPosted: Thu Jul 05, 2012 2:11 pm 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1201
jaiko wrote:
>>did you factor in the fact that AIG writes most of the PMI?>>

??? I still fail to see what that has to do with AIG's life and annuity business. That market segment is ENTIRELY SEPARATE from the other AIG units. The life and annuity books of business are extremely valuable and any large insurer would love to snatch it off the market if AIG was ever stupid enough (or forced to) sell it.

We should apologize to the OP, the AIG postings have nothing to with LTCi.

Under the circumstances of the day, it probably was very relevant since AIG as a company need a taxpayer bailout regardless of what the life & annuity business was or was not doing. I just thought I'd point out the PMI piece of their business since it was mentioned.

I realize that their life & annuity business is a valuable 'cash cow' as you put it. That's how insurance works ain't it? Collect premiums when times are good, don't pay out when times are bad. Pretty fool proof system if you ask me.


Top
Offline Profile E-mail   
 Post subject: Re: Long term care insurance
PostPosted: Sun Jul 08, 2012 10:53 am 
Moderator

Joined: Wed Sep 23, 2009 9:01 am
Posts: 5398
jaiko wrote:
>>Were it not for a bailout, AIG would have failed. And from what were here of their leverage and derivative obligations, the insurance assets would have been tied up for decades.>>

Not true from what I understood. One PART of AIG was in danger of failing, but NOT the insurance business itself, which is a huge (and widely acknowledged) "cash cow". That's why it's never difficult to find another carrier to buy a block of business. All the expensive up-front underwriting and sales costs have long run off, the required insurance reserve $$$ are already booked and can be easily transferred, and the premiums coming in are 99.9% profit.


AIG had to be bailed out and bought by US taxpayers because no other buyer would step up. They might have had some solvent lines of business but even at the time it was definitely not assured that those could be effectively isolated. Lehman was in a similar state and failed. It had solvent and profitable businesses but that was not enough.

jaiko wrote:
??? I still fail to see what that has to do with AIG's life and annuity business. That market segment is ENTIRELY SEPARATE from the other AIG units. The life and annuity books of business are extremely valuable and any large insurer would love to snatch it off the market if AIG was ever stupid enough (or forced to) sell it.

That was why the AIG CEO was so resistant to the idea of selling off the insurance business. It was and still is, the major source of ready, continuing cash flow.

It's why you see different businesses under one holding company. The CDL segment COULD NOT touch the insurance/annuity funds.


Unfortunately this is a nice idea, and a good selling point for investors and policy purchasers. But it is entirely wrong. Old Republic, another major insurance company with a couple of runoff businesses, one a mortgage insurer, was recently prevented from spinning off a runoff business because an unidentified stakeholder claimed its interests would be harmed by separating the obligations from the runoff business from those of the solvent parent.

It's a new landscape. Four years later some of the true risks of the investments made before 2008 are only now being exposed. And in many cases those risks do expose policyholders in ways that were not contemplated back then. It's fine to get a counterparty to assume your risk. But when the counterparty fails to understand the risk and goes out of business, you get the risk back whether you like it or not. Often these risks transcended national boundaries so that jurisdiction and legal options are not clear.

My point is not that you are completely wrong. My point is that much has changed and the old way of isolating insurance operations is simply no longer working. I would not want to bet my long term future on what worked pre-2008!


Top
Offline Profile E-mail   
 Post subject: Re: Long term care insurance
PostPosted: Thu Sep 19, 2013 11:38 pm 

Joined: Thu Sep 19, 2013 10:22 pm
Posts: 2
Location: Denver
babysteps wrote:
Would love to hear from anyone who has a story of an immediate family member for whom LTC was a positive (whether emotionally, $ or both).


I did! Actually, we had some positive feedback on LTC.

My Gramps suffered from sundowner syndrome when she was 89 (she was suffering from mid-stage dementia that time, which was 2009). We were devastated when the doctor first brought us the news from here initial diagnosis. We were, however, crushed when the symptoms progressed seeing her on that condition. She declined nursing facilities from her insurance company [BTW, a short segue, let me just praise Gramps' insurance company for taking the entire matter very well. It was [SPAM LINK REMOVED], I think. Or maybe they've change their website, I don't know and I don't care] sooo we resorted on the 12-hour daily in-home care for her for like seven months. She became more aggressive however as months passed. She would sometimes call me in the dead of the night asking me to send her nurse away and when I declined, saying that it wasnt possible, she'd lock the entire house whenever chance permitted it and stayed there threatening to burn the entire house. We even called police to settle the matter.

After that incident, we asked for a 24-hour in-home care.

When she's medicated, she was much better, but she'd refuse to take pills and rejects most food that any pills can be crushed into. So it was always a daily chore for her attendants to keep her meds on schedule.

We were trying so hard and thank God for that LTC insurance that Gramps bought. It wouldve have been very difficult and complicated without the assistance of those nurses and medicines.


Top
Offline Profile E-mail   
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 40 posts ]  Moderators: bpgui, JerichoHill Go to page Previous  1, 2, 3


Who is online

Users browsing this forum: Google [Bot], Yahoo [Bot] and 6 guests


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot post attachments in this forum

Search for:
Jump to:  
Powered by phpBB © 2000, 2002, 2005, 2007 phpBB Group
Theme created StylerBB.net & kodeki