State Of Connecticut Nursing Home Insurance

Ct Consumer Complaint: MetLife “Longterm” Care Insurance

From Thomas J. Annulli

My 88 year old mother has a longterm care insurance policy which would cover nursing home for 3 years with maximum benefit and a quality home.  She has had this policy for 15+ years.  Last week she received notice that her premium will be increased, for the first time ever, by 39% as MetLife needs to recoup costs associated with this product.

When I called MetLife  they actually had the nerve to say “we have gotten out of longterm care insurance because we lost too much money on it.”  Their solution offered is to either pay more – which would raise her premium from $3,500 per year to $4,965 per year, or get less monthly benefit (lower quality nursing home) or a shorter benefit period.  So, I asked them, what happens if my mother dies without using her policy, do they refund the $52,500 in premiums my mother already paid as she made a mistake thinking she would need the policy?  Of course, they said no.

I called the State of Connecticut Insurance Department and got a pleasant person who tried to be helpful and she said that the Insurance Department approved this as it was necessary to recover costs.

I questioned her from a business perspective – MetLife is the one who set the rate 15 years ago, and if as professional actuaries they guessed the cost wrong, they should swallow their lumps and raise the price on new policies – she told me that is illegal, that they must charge everyone the same – that makes no sense to me.  Isn’t the primary function of an insurance company to determine an amount of risk they have, and then spread that risk, based on their actuarial tables, among a pool of customers to make money?   Not much different that a bookie taking bets on a game?

This makes no sense to me, other than MetLife trying not to payout, and the Insurance Commissioner coddling the large company.

Thomas J. Annulli

Middlebury, CT

Mr. Annulli,

I understand your frustration after being in the industry for 30 years and have been on 5 product developement teams there are a lot of factors that cause rate increases. This is not intended to make excuses. It is just what can be the causes for rates to go up. A. Investments effect reserves. If a carrier has heavy losses or interest rates on investments are substandard will cause rate increases and a possible lowering of a companies ratings. B. The company loss ratio exceeds 65% by miscalculated underwriting. C. Retention rates is a big one, if underestimated. The retention rates on LTCi is in the high 90′s almost 96.5%. Because policyholder do keep their policies, higher claims are inevitable. 15 years ago, most carriers anticipated 88-92% D. Modern medicine is very skillful at keeping people alive longer in a degenerative or chronic state. E. Large amount of policies that have a 5% compounded inflation option and/or unlimited benefits. These policies cause reserve issues. In the case of unlimited benefits, a carrier has to set a side $250,000 per claim and can not touch those funds no matter the length, even if the care lasts 12 months. Actuarial tables for mobidity on LTC are still in learning stages. The first policy was written in 1974, with all the above factors there is still allot to learn. Math is simply a tool, and at this point I would take the amount of premium I paid in and determine how many months of care if a claim is paid to recoup the premiums invested. With your Mom at 88, she has a high probability she will need assistance. It is never easy and if it does occur, you will be glad she has coverage. If she never has the experience that is a blessing. Insurance is to ward off potential risk no one has a crystal ball. We always hope we never have a fire, accident or death but if we do insurance can help rebuild or provide peace of mind. My Best Enclosed to you and your family.

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