When you're buying long-term-care insurance, you are sold on both the policy and the excellence of the company. But don't fall in love with your LTC insurer, because it won't fall in love with you.
The industry is consolidating. Two major companies recently sold their LTC business and a third is trolling for a buyer. A sale delivers the policyholders to a new insurer.
Maybe that will work out fine. The new insurer's financial strength and customer service might be just as good, or better, than you had before. The terms of your current policy will stay the same.
But you don't know how the new company will view the premiums that you pay.
Your old insurer may have underpriced your group of policies. If so, you've enjoyed a lower premium than many other people pay. But the policies aren't very profitable.
As the industry consolidates, "there's going to be pressure to increase prices," says David Larson of the Larson Long Term Care Group in Bothell, Wash. After the sale, your premiums might rise. Or they might rise before the sale, so the new insurer won't have to take the blame.
The LTC business improved last year, from what had been disappointing levels. Sales of employee-group LTC policies leaped 56 percent, according to LIMRA International in Hartford, Conn., which gathers insurance data. Sales to individuals rose 12 percent.
But interest in LTC coverage remains relatively low. In group plans, an average of only 6 percent of employees join, says LIMRA senior analyst Patricia Ash.
Insurers are expecting more sales as baby boomers age. In the meantime, each company is reconsidering its commitment to LTC. Some want more business, others want out.
Fortis, for one, just sold more than 97,800 LTC policies to John Hancock Life Insurance Co. Fortis left the LTC business after just 12 years.
Travelers Life & Annuity, which also wrote policies for 12 years, agreed recently to sell 90 percent of its LTC business to GE Financial Assurance. Travelers will transfer 140,000 "covered lives."
CNA announced in March that it's seeking a bidder for its entire line of individual insurance -- life, annuities and long-term care. CNA has been writing LTC coverage since 1974.
Former LTC sales agent Martin Bayne, who maintains an informative Web site (mrltc.com), wonders about the customers who are buying CNA policies now. Are the agents disclosing that they'll soon pass into an unknown insurer's hands?
Spokesman Clark Walter says any sale of CNA's policies "would be to a substantial player, so our policyholders are safeguarded."
If your own LTC policy is sold, your first concern should be your new insurer's safety-and-soundness ratings.
The company should carry top marks from at least three of the five major rating services, says Joseph Belth, insurance professor emeritus at Indiana University and publisher of the newsletter, the Insurance Forum.
Each rater keeps a different scorecard. Here's an acceptable range for conservative policyholders, Belth says:
A. M. Best: a top of A++, but no lower than A+; Standard & Poor's: AAA down to AA-; Moody's: Aaa to A1; Duff & Phelps: AAA to AA; and Weiss: A+ to B-. The company should supply all its ratings, on request. GE Financial and John Hancock pass.
You should also ask what happens if the new insurer fails.
When a policy is transferred without your permission, the old insurer would still be responsible, Belth says.
In the John Hancock deal, Fortis remains responsible in the unlikely event that Hancock fails, says Hancock spokeswoman Melissa Simon.
Travelers spokesperson Keith Anderson says that issue will have to wait until the sale to GE closes.
Finally, ask about the new company's history of raising premiums. Insurers can't raise your price individually. But they can raise it collectively on all the policies sold in your state.
The financially squeezed Conseco Inc., for example, which has bought several smaller insurers, is an aggressive rate-hiker.
Fortis raised some premiums before selling to John Hancock, says Larson, who tracks LTC rate increases. John Hancock, GE and Travelers have never raised rates on existing policyholders.
A rumor that rates on Travelers' policies will rise is wrong, says GE spokesman Mike Kachel.
CNA announced in January that premiums would not rise for 10 years on policies it sold after Sept. 15, 1999.
Any company that buys these policies will have to honor the terms.
When the decade is up, however, you might pay more, depending on how profitable the policies are. In LTC, there are no free rides.
Washington Post Writers Group