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Prudential Pulls Out of Individual LTC Insurance - The Story Behind the Story

Posted May 11 2012 9:00am

               “Everyone is entitled to their own opinion, but not their own facts”
                                             Daniel Patrick Moynihan

A guest blog from Raymond Lavine/ /
253.778.6831 or 888.222.1789 /

Prudential Insurance Company announced that they will no longer offer LTC plans to individuals but will continue to offer long-term care insurance to employees in companies.

Some facts:

Writers and opinion makers comment that long-term care insurance is complicated. It is not complicated once explained by a knowledgeable and informed person who sells or advises people and companies about long-term care insurance.

Insurance companies are in the business to offer products and services which is of benefit and value to the consumer and for this they make a reasonable return on investment.

Prudential is not in financial trouble as is sometimes the myth offered when a carrier ceases to offer a product. Prudential, Met Life, Allianz, Unum, and many other insurance companies, who no longer offer LTC insurance, decided that the return on investment is not adequate to sustain the marketing and sale of their products which offer care giving services.

What caused this to occur  
Most carriers and insurance agencies explain to the consumer the high cost of care giving services and why owning long-term care insurance is helpful to transfer the risk from the consumer to the insurance company. Then the consumer is surprised when asked for health and financial information when all they wanted was a quote. Why is there a disconnect?

Long Term Care coverage is not a commodity as is life, health, auto, and home insurance.  With long term care insurance it is your health which owns the coverage which means you have to own it “properly the first time.” In other words, the state of your health and the ability to pay for coverage affect the plan you may purchase. The premiums in your state are the same no matter who provides the LTC plan design.

There are 3 factors insurers consider when making their plans: the type of product offered, the price, and the targeted demographic.

What has occurred is Rate of Returns are not meeting what was anticipated. People are living longer and past what the actuarial table say so companies are paying more out. And once people comprehend how valuable owning a long term care plan is to their emotional,  financial, and physical lives they keep their plans, which means that sooner or later a person will go on claim and use the benefits.

(Editor's Note: my wife purchased long-term care insurance as a voluntary benefit in her 40's. Her annual premium, annual, is less that $600 with an inflation rider. Think she is giving that up?)

Long Term Care benefits have evolved and transitioned from nursing home plans to comprehensive caregiving services whether at home or in a care facility whether by choice or circumstances. Although these plans are designed to favor the consumer, the insurance company has to make sure that there are sufficient reserves and profits to sustain these plans. Some carriers have been raising premiums to make sure there are sufficient reserves or carriers decide it is not financially worthwhile to offer LTC products.
In other words, these companies have to make a profit too.

Prudential will be missed. But don't fret because there are other quality companies available to offer quality and competent plans.

In a future article I will explain the challenges of LTC care giving underwriting which is a topic misunderstood. This is a challenge why insurance companies enter the long term care business and why they eventually decide to to leave this area of insurance coverage. Better understanding this will help you to make better decisions about your care planning.

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