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John Hancock exits long term care insurance sales

by Jack Lenenberg

John HancockJohn Hancock Discontinues LTC Insurance Sales

One of the pioneers of long term care insurance announced today it is making the difficult decision to stop selling long term care insurance policies effective December 2, 2016.  John Hancock has underwritten long term care insurance since 1987 and is the second largest underwriter of individual long term care insurance policies.

Since 2002, interest rates have declined to their current low levels placing increased pressure on capital reserve requirements.

The long term care insurance business is a very capital intensive business.

To offset the low interest rates, long term care insurance underwriters have been forced to underwrite higher priced policies compared to policies sold 15-20 years ago.  The increase in higher LTC insurance premiums have decreased consumer demand for traditional long term care insurance policies.

This past April, John Hancock introduced a new policy called Performance LTC which was supposed to create interest and increase sales for John Hancock. 

Performance LTC was marketed by John Hancock as a "unique" long term care insurance policy in that it offered an increasing premium rate structure.  Within the Performance LTC policy was the possibility that John Hancock could declare premium credits tied to its claims history and future investment returns to offset the guaranteed future premium increases to policyholders.  Among long term care insurance specialists, however, the John Hancock Performance LTC policy was not well received as a good consumer value.  The guaranteed premium increases were stark, and consumers did not want to assume the risk of "hoping" for a credit.  I personally felt John Hancock Performance LTC was not worth considering whatsoever.

So, 7 months after bringing its new idea to the marketplace, John Hancock has made the decision to get out.

John Hancock has analyzed the macro-economic trends.

Sales of traditional long term care insurance policies have been stagnant, while sales of hybrid long term care insurance policies (combination life/LTC, and annuity/LTC) are increasing dramatically.  

As such, John Hancock will no longer sell individual long term care insurance policies. 

John Hancock will continue to underwrite the Federal Employees Group LTC Insurance Program.  For now.

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