Texas Department of Insurance Permits 75% Increase in Long-Term Care Insurance Premiums

 

The Texas Department of Insurance (which regulates increases in insurance premiums) has permitted Allianz Life Insurance Company of North America (”Allianz”)  to raise its long-term care insurance premiums by 75% to existing policyholders according to an article on July 25 written by Dave Lieber (the Watchdog columnist) of the Dallas Morning News. The rationale of the state regulators was that the company originally underpriced the cost of long-term care and the permitted increase was granted on the condition that Allianz not come back to the state for another increase. Allianz, which no longer sells long-term care insurance policies, was unable to secure an increase of more than 25% in any other state. It is my opinion that this decision of our regulators sends the wrong message to Texas consumers. At a time when people are living longer (there are close to 80 million American Baby Boomers not even including our more elderly population), the government should be encouraging (not discouraging) the purchase of long-term care insurance in case of need of assistance at home, assisted living or in a nursing home, etc. As a result of people living longer, there is going to be a greater need for long-term care than presently exists. Many seniors live on a fixed income and generally have less discretionary dollars at their disposal. Although I personally recommend to many clients that they consider long-term care insurance, a common retort is the fear of an increase in premium – especially for those on a fixed income. This fear is only exacerbated by this decision of the Texas Department of Insurance. In effect, the message to insurance companies is go ahead and underprice the market, collect premiums as long as you can and when you are no longer being profitable, we will allow a large increase so you can, in effect, no longer honor your policies since many policyholders cannot afford the high premium increase. Although those with more means can possibly self-pay or consider a single –premium hybrid policy so there is no worry about a premium increase, this decision is a deterrent to what we should be encouraging (insuring against long-term care costs) and will only result in many of our burgeoning aging population relying on public benefits – which is an unsustainable burden on our federal budget at the present rate.

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