04 December 2008

Our Egalitarian Society & the Economic Down-turn

No, I'm not going to propose that we are all equal in our circumstances caused by the economic down-turn (AKA recession). But our egalitarian society is at play in responsibility for certain next choices.

In the olden days (I am certain this was as short as a decade ago), we were assured that financial advisers could guide us well and that we were not expected to be able to analyze markets, project long-term needs, and so forth. So, regardless of whether you took that to mean you should follow advice to invest in stocks, buy bonds, or buy an annuity, you probably nodded agreeably to other (sure) things: your employer's retirement plan and the offer of a long-term care insurance policy.

Well, times have changed.

This week, a Wall Street Journal article* reported on a change in Conseco's long-term care insurance policies that may increase premiums for the customers and even reduce their benefits in the future. The change is intended to "cast off" a losing proposition for the company as the policies are transferred to an independent trust that will handle claims as it can based on $175 million current capital. The 140,000 policy holders may or may not be well served—only time will tell. But the fact that new policies haven't been sold since 2003 suggests that Conseco predicted bad times ahead for long-term care policies.

Here's my point on our egalitarian society: the WSJ article advises that new buyers should "take particular care in picking out a financially stable insurer."

A recent conversation with a friend in Colorado underscores the power of that advisory: "Our financial guy says we need to decide about keeping Jeffrey's retirement account with the company or cashing out now. He said we have to think about whether the company will be around in 8 years to pay out the money. I told him I thought he was supposed to know. And he said, no, it's up to us to make that assessment."

Well, as I said, times have changed. Experts aren't even claiming their expert status anymore, or at least they don't want to shoulder the responsibility of analysis. And in an egalitarian society, after all, we are all equally able to make the analysis. There's the rub. It just may be that we really are equally able.

* McQueen, M. P., (2008, December 3). "Insurer Casts Off Long-Term-Care Policies," Wall Street Journal.

© 2008 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

1 comment:

Scott A Olson, CLTC said...

I believe that the Pennsylvania Insurance Commissioner concluded that it was in the best interest of the Conseco LTCi policyholders for PA to set up this trust, with the goal of more effectively serving the current and future claimants.

The PA Dept of Ins. is facing a very difficult situation with a different insurer that might need to go into conservatorship next month. I think the PA DOI's conclusion regarding the Conseco policies, is that a well-managed trust now is better than trying to mop up a big mess through conservatorship later.

At least by putting the policies into a trust, the Pennsylvania Insurance Commissioner can do a better job administering the policies, cutting costs, and paying the claims than Conseco Senior Health had been doing.

Insurance companies don't have the authority to "transfer policies into a trust". It was the PA DOI that had the authority to do this and approved it and they did it for the benefit of all present and future claimants holding the Conseco policies. They did it because Conseco Senior Health was on the road to insolvency.

As with any insurance purchase, it's very important to check the financial ratings of the LTC insurers you are considering.

Most of the leading long term care insurers have been in business for over a 100 years (and writing LTCi for 20+ years).