US insurance executives have been accused of making “obscene” demands to suddenly double care policy premiums for the elderly in clashes that highlight growing tensions over who pays for ageing societies.
Angry customers of MetLife, the biggest US insurer by assets, and Unum, another provider, who have paid into long-term care policies for years complain they would be forced to stump up thousands of additional dollars or be left with inferior care in old age.
Audrey Kennedy, who expects to begin claiming on a MetLife policy for her husband, who has Alzheimer’s, faces a rise in her annual premium from $8,000 to $16,000 a year.
“[The threatened 95 per cent rise] is just unconscionable,” she said at a hearing last Friday in Florida, where the latest premium increases are set to apply pending approval by the state’s regulator.
Insurers argue the increases are necessary as people live longer, causing claims costs to soar. Ultra-low interest rates have tightened the squeeze by eroding investment returns.
Many companies, including Prudential Financial, AIG and Allianz, have been pushing through premium rises for the insurance, which pays out if policyholders become incapacitated through conditions such as dementia and need professional care.
About $8.15bn in claims were paid out to 260,000 individuals last year, according to the American Association for Long-Term Care Insurance. Much of the industry has stopped selling new policies. Insurers are allowed to increase premiums for existing customers if they secure approval from regulators in each state.
In Florida, thousands of customers could be hit by premium increases by MetLife, which is seeking rises of as much as 95 per cent, and Unum, which wants to push up premiums as much as 114 per cent. Elsewhere, federal government workers and pensioners are also facing big increases through an employer insurance scheme.
Regulators typically grant insurers permission to increase premiums by significantly less than the companies have requested. Nevertheless, the hearings highlighted policyholders’ anxiety around the large increases.
Several policyholders complained sales agents had failed to warn them properly about the threat of increased premiums — and that they had been left to pay the price for big miscalculations made by the companies.
Jose Aragon, a resident of Coral Gables, said the “extreme increase” proposed by Unum was “simply unaffordable”.
“If we cannot force the Federal Reserve to increase the returns that we receive on our investments, insurance companies should not be able to increase our premiums to make up for the return that they did not receive.”
Noel Weinstock, who has paid $30,000 into a MetLife policy, said it was an “obscenity” for the insurer to call for such large rises after it paid out $1.7bn worth of dividends to shareholders last year.
But defenders of the industry argue the policies still provide a good deal, and the stability of the insurance sector could be undermined if it was required to meet the obligations in full without increasing premiums.
Amount in claims paid out to 260,000 individuals last year
George Braddock, a long-term insurance sales specialist based in Florida, said customers had been forewarned prices could rise. He added that nearly all the companies operating when he began his career in 2000 were no longer selling new policies. “We need them to stay in the business.”
MetLife and Unum acknowledged the impact of the premium increases on customers. But Jonathan Trend, actuary at MetLife, said the “increases are needed because the experience relating to these policies has been, and is expected to remain, materially worse than initially anticipated.”
Steve Zabel, an executive at Unum who manages the insurer’s historic policies, said: “Long-term care losses have had and will continue to have significant adverse impacts on our company.”
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