By now you’ve most likely heard that John Hancock has announced significant changes nationally in it’s long-term care insurance product line-up. The good news is that Hancock is staying in the game and will continue to be a significant player in individual and multi-life LTCi. The bad news for those of us with a focus on doing business in California is that the sale of John Hancock’s Custom Care II, Custom Care II Partnership and Corporate Solutions (multi-life) will be temporarily suspended on June 7, 2010. I’ll comment on the reasons in a moment but first let me provide you with the rules and deadlines for final application submission specific to California business.
Custom Care II, Custom Care II Partnership and Corporate Solutions (multi-life) applications must be dated on or before June 6, 2010, and must be received at the home office by June 21, 2010. This means that applications must be received in the BJFIM/Paradigm Woodland Hills, California office no later than June 18, 2010 so that they can processed and FedEx’d to the home office to meet the deadline. Lot’s of “must be’s”, but having been through our share of fire sales over the past 15 years we know how important it is to understand the rules set forth by the insurance company in order to get this business issued. Rest assured that the BJFIM/Paradigm LTCi team will do everything it can to help you get those applications submitted in a timely manner.
John Hancock has a number of other product changes, suspensions and withdrawals in various different states. For state-by-state rules and information contact your BJFIM/Paradigm Marketing Representative or CLICK HERE for JH’s May 3, 2010 product announcement.
So you may be wondering why this is happening and is there cause for concern. In my opinion the short answer is “NO”. Let me start with the situation in California. The primary reason for the withdrawal is the glacial regulatory environment at the California Department of Insurance. Custom Care II, the basic chassis for all products sold in California, has needed a new business repricing for several years now. John Hancock has filed the request, but as is typical, it languishes on some bureaucrat’s desk. Long-term care insurance new product approvals and repricing is a low priority at CDI and the shortened work week now in place for state government employees has made matters even worse.
In my opinion John Hancock has made a good business decision pertaining to its California business. If the home office actuaries are not comfortable with a product’s pricing as it pertains to a host of global economic issues (which appears to be the case) the responsible thing to do is suspend sales. This isn’t the “schmata” business; an insurance company cannot lose money on every sale and try to make it up in the volume.
On the national level John Hancock appears to be honing it’s product offering. At this point I don’t see any red flags that would indicate wholesale abandonment of this market segment or risk. All major long-term care insurance companies have or will reprice compound inflation protection, move away from lifetime benefits and attempt to simplify their overall product lines. I may be wrong but as agents we should be supportive of an insurance carrier’s attempts to act responsibly in product pricing. We’ve seen the results of the opposite strategy and they can be ugly.
That being said there’s a whole lot of opportunity in this news. Here’s a quick review:
- The most obvious is to close out any existing John Hancock long-term care cases you have by the submission deadlines outlined above. If Custom Care II (particularly California Partnership) is the right choice for your client then there’s no time like the present to get it done. Be assured that when JH comes back into California, the premiums on 5% compound inflation will be much higher and lifetime benefits will probably no longer be available.
- Going forward we still have a number of great companies with mid-2000′s 5% compound inflation pricing; Prudential, Genworth, United of Omaha, Transamerica and Berkshire have not yet repriced. I’ve said it before but I’ll say it again, your client/prospect will never see better premiums then NOW on 5% compound inflation protection. How do you say going, going, gone!
- If California Partnership is your client’s preference then after June 6, 2010 your one viable choice in the independent LTCi brokerage channel will be Genworth. Additionally, Genworth is one of the few companies that continues to be bullish on lifetime benefits. After a rough 2009 Genworth is looking very strong.
- MetLife’s new LifeStage Advantage offers a very simplied “piece of money” product chassis. While the 5% compound inflation rider has been repriced upward on both LifeStage and VIP 2, other inflation options coupled with multi-life at three lives make Met an important player in the multi-life market.
Regardless of these and future changes anticipating the long-term care risk is an essential part of responsible financial and insurance planning. For better or for worse traditional and linked LTCi products will continue to evolve but the problem remains the same. The solution is get your client’s needs covered with the best choice or choices that exist in today’s marketplace.
BJFIM/Paradigm stands ready to help. Call us today!