Future looking less bright for private insurance

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John O'Connor, editorial director, McKnight's Long-Term Care News
John O'Connor, editorial director, McKnight's Long-Term Care News
I have a simple solution for improving weather forecasts: Put insurance companies in charge. For when it comes to making accurate predictions about the future, these folks are second to none.

And these days, their crystal balls seem to be spot on.

Need proof? Take a look at your town's skyline. Chances are that many of its largest and most impressive buildings are owned by insurers. Do you think these risk managers get to own skyscrapers by guessing wrong?

These firms have grown big, strong and profitable by making lots of smart bets. And they've done so year after year, decade after decade. So what should we make of the fact that more of them are hedging their bets when it comes to selling nursing home insurance (or, to use the correct term, private long-term care insurance)?

In the past three years alone, Unum Group, Guardian, MetLife and Allianz have left the business. And that list seems likely to grow.

By the way, I am not arguing that such insurance is a bad thing. Far from it. For most people, it remains one of the few real hedges against financial ruin in old age. The product is also great for providers, as it guarantees a reliable funding stream.

So please don't write a note back saying I am trying to rid the world of private insurance. I'm not. What I am saying is that many of the insurers themselves seem to be losing their nerve.

In fairness, they have a point. It's hard enough to determine with exact precision how much future demand there will be for long-term care, which particular services will be required, and to what extent. It's even more challenging to price policies for these services in ways that attract customers without inviting insolvency.

Already, we are hearing some experts say that insurers who stick around will have to change what they cover and perhaps jack up premiums.

That's not even factoring in the fact that many people believe that if the need for such care arises, they will be covered by Medicare (largely incorrect) and Medicaid (yes, once they are sufficiently destitute).

Insurance firms like to say they are in the business or managing risk. In truth, they are in the business of guessing right. These days, more of them are deciding that these policies are not worth selling. If that doesn't give you reason for pause, it probably should.


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Daily Editors' Notes

McKnight's Daily Editors' Notes features commentary on the latest in long-term care news and issues. Entries are written by Editorial Director John O'Connor, Editor James M. Berklan, Senior Editor Elizabeth Newman and Staff Writer Marty Stempniak.