Guardian Life’s the Latest to Halt Sales of Long-Term Care Insurance

A subsidiary of Guardian Life Insurance Company of America is halting sales of its long-term care insurance product by the end of the year.

Berkshire Life Insurance Company of America is the stock company subsidiary of Guardian Life that underwrites and issues its long-term care insurance policy.

"Our decision to transition out of the market was made after an extensive review of the business and will allow Guardian to focus on its core life and disability income insurance business," said Gordon Dinsmore, president of Berkshire Life, in a statement.

The company entered the long-term care insurance market "prudently, deliberately maintaining a small presence" to ensure that Guardian's financial representatives had a comprehensive portfolio of products, Dinsmore said.

"While it is our intent to continue to make the current product available for the remainder of 2011, circumstances could arise that may require us to re-evaluate our plans and discontinue sales before year end," Dinsmore said.

The company's long-term care policies are guaranteed renewable, which means coverage can't be canceled as long as premiums are paid on time, he said.

Attempts to get additional comment from Guardian, a mutual insurer, were unsuccessful.

Last November, MetLife Inc. (NYSE: MET) said it would stop selling new long-term care insurance coverage. "There have been financial challenges within the long-term care industry as a whole," a MetLife spokeswoman said (BestWire, Nov. 11, 2010).

"Established companies with large books of business have been impacted by a simultaneous triple whammy of lower lapse rates, more claimants and historically low interest rates," said Jesse Slome, executive director of the American Association for Long-Term Care Insurance, in an e-mail.

"When you project that out over a number of years, they just foresee an even greater financial problem," Slome said. For smaller insurers that attempted to enter the market, "they just did not achieve the rapid critical mass I suspect they had hoped for."

Also last fall, a spokesperson for Genworth Financial Inc. (NYSE: GNW) said the industry was contending with persistency problems -- one reason it was seeking premium increases on some long-term care policies (BestWire, Oct. 25, 2011). Persistency, or the number of people who will keep their policies over time, led to higher claims than the pricing that was assumed for the policies, Genworth said at that time.

The long-term care insurance market is about 15 million to 18 million because not every baby boomer can health qualify or afford to buy this product, Slome said.

Last year, several Republican senators were seeking to repeal a little-known provision in the U.S. health care reform law that created a government-run long-term care insurance program, called the Community Living Assistance Services and Support Act. The government was to start collecting premiums this year (BestWire, Oct. 12, 2010).

Slome said the government has not started collecting premiums, and the first employee enrollments are expected -- possibly in 2013. The U.S. Department of Health and Human Services is hiring staff, including the chief actuary for CLASS, to determine pricing and benefits, and a major study is being done, he said.

Under CLASS, participants would pay a monthly premium to be determined annually by the Secretary of HHS. The premium is a deduction from take-home pay that would continue -- unless an employee opts out.

In alphabetical order, the top U.S. long-term care insurance carriers in 2009 included Banker's Life & Casualty, a unit of CNO Financial (NYSE: CNO); Genworth Finanical; John Hancock; Massachusetts Mutual Life; MetLife; Mutual of Omaha; New York Life; Northwestern LTC; and Prudential LTC, according to LIMRA (BestWire, Oct. 12, 2010).

Guardian Life Insurance Company of America and Berkshire Life Insurance Company of America each currently have Best's Financial Strength Ratings of A++ (Superior).

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])