The decision by Prudential Long-Term Care to discontinue unlimited or lifetime benefit sales inCalifornia was not a surprise to Susan and I. Last week we had the pleasure of joining Prudential?s senior staff, in San Antonio, to discuss the company?s current growth and plans for the future. While we would have preferred for Prudential not to have had to do this, their reasons are justifiable and could be a harbinger of similar actions by other long-term care insurance companies.
Simply stated, Prudential has learned, that in California, their incidence of ?questionable claims? is significantly higher when lifetime benefits are in play. The claims in question generally involve younger insureds, the presence of long-term care insurance policies in-force from other carriers and cash benefits. The bigger problem seems to be that even when theCalifornia courts are presented with strong evidence that fraud may be involved it is generally inadmissible as evidence or ignored. In this sort of environment can an insurance company be blamed for not protecting the viability of existing and future policy holders?
Does this decision have any impact on the market or future sales? Probably not. Lifetime benefits as a percentage of the overall market have been decreasing steadily for the past several years mainly due to pricing issues. Also, as more and more agents realize that unlimited may be benefit overkill, many have embraced five and six year programs. Finally, as the market shifts to simplified issue/multi-life sales, where unlimited benefits are not offered, most agents have realized that selling some benefits to more people is the way to go. Therefore, we don?t believe that this decision by Prudential or any other carrier will have any impact on the market whatsoever.
Should this choice by Prudential or a similar decision by another carrier cause you to lose confidence in the industry? I don?t think so. We can tell you that Prudential and other companies are currently working on next generation products. Also remember that this action is California specific and is in response to a judiciary which appears to be adverse to business. The trial lawyer community in this state is powerful and let?s faces it, where do you think the judges come from to begin with.
Regardless, I?m pleased that Prudential is staying on top of its claims with an eye towards maintaining viable products and pricing for the long haul. We still have plenty of products to offer clients even lifetime benefits. Therefore, while we don?t like to deliver news like this, at the end of the day, it will have little impact on consumers or our businesses.
Have a great weekend!
Please note that the comments and opinions expressed in today?s Blog are my own. For more information email me at barry@paradigmins.com.