MetLife Dropping Long Term Care Insurance – What Does it Mean for You and Me?

I have been saying it for years now.  Long term care is a growing problem in this country, one that won’t go away.  Not with the population continuing to age as 77 million baby boomers start to turn 65 in a little more than a month.  The sheer number of people entering the long term care system is something no one knows whether we are prepared to handle.  Perhaps the recent announcement by MetLife that it is pulling out of the long term care insurance market is an indication that we need to pay closer attention to this growing problem.

 The reasons for MetLife’s decision are twofold, rising number of claims and decreasing interest rates on reinvestment income.  This comes on the heels of recent announcements by John Hancock and Genworth that they are raising premiums, in John Hancock’s case by as much as 40% for individual policies.  On the other hand, companies like Northwestern and New York Life have not raised rates.  Rather, in some cases new products have been introduced.

 So, what conclusion can we draw from all this news?  For one thing, long term care is something that everyone ought to examine very closely, and for many who are approaching senior status, they should put it on the front burner of issues to tackle.  And while I do believe that long term care insurance is an important part of the solution, a well crafted long term care plan shouldn’t rely too heavily on any one thing.  Just as diversity in investment is wise, so is diversity in planning.  One can’t “set it and forget it” because, as we are witnessing, the insurance industry is still wrestling with decisions on how to make long term care insurance “work”. 

MetLife is saying they can’t make it work.  Too many claims and not enough money to cover those claims.  Did MetLife mismanage their business or is this an industry wide problem?   I am certainly not knowledgeable enough about MetLife in particular or the insurance industry in general to be able to answer that question.  I certainly hope it isn’t an indication of more companies pulling out of the market.  More choices are better for the consumer.  But what I do know is that the warning signs are there for anyone paying attention.  Long term care is the greatest threat to financial security in this country.  Ignore that fact and you do so at your own peril.