Manulife exits the Long Term Care insurance market

By Kate McCaffery | December 13 2017 07:00AM

Photo: iStock

Following in the footsteps of its U.S. subsidiary, Manulife Financial announced that it will cease selling new individual Long Term Care (LTC) insurance policies in Canada as of Nov. 30.

The announcement, made via the company’s RepSource website, comes one year after it announced that John Hancock Life Insurance Co. would discontinue the sale of its own LTC policies in the United States.

The company says the move will not impact any in-force individual disability or critical illness policies which include long term care features and options, or any other in-force LivingCare policies.

In Canada, Manulife’s move to exit the market follows a similar move made by RBC Insurance when that carrier discontinued new policy LTC sales back in 2012. Today, four carriers offer LTC insurance. They are Desjardins Insurance, Sun Life Financial, Blue Cross (ON,QC) and La Capitale.

Sun Life says it remains committed to offering LTC insurance in the future. “We offer a wide range of products to help individuals through every stage of life, including Long Term Care insurance,” says Dean Chambers, vice-president, individual insurance at Sun Life. “This product has been and will continue to be an important offering.” Representatives from Desjardins were not available to comment.

Limited market acceptance

In its announcement, Manulife says it came to the decision to discontinue sales of the product, due to “limited market acceptance” and “new federal laws that restrict insurer access to medical information,” likely a vague reference to new federal anti-genetic discrimination legislation.

Manulife would not comment or further elaborate on the announcement.

The Genetic Non Discrimation Act, which went into effect last May, has made it illegal for an insurer or employer to require a person to undergo genetic testing, or release the results of previous tests to get insurance or to enter into any other contract agreement.

The Canadian Life and Health Insurance Association which opposed the bill, is monitoring the impact of the new law. “Our concerns remain centred around anti-selection and the resulting cost increases which could price some Canadians out of the market. Rather than increasing access to insurance and keeping it affordable, it would do the opposite,” the CLHIA wrote. “We continue to monitor the situation closely.”

Those selling the LTC product, meanwhile, say the “limited market acceptance” aspect of Manulife’s claims are part of a two-fold problem: limited advisor training, and little to no public awareness support for the product.

“Canadians don’t understand what long term care insurance is,” says Karen Henderson, founder and CEO of the Long Term Care Planning Network. “Many of them have never heard of it. Insurance companies are doing nothing to support their products. If you aren’t going to advertise a product, or help to educate people, how are they ever going to find out about it?”

Living benefits consultant, Tim Landry and Henderson both say advisor training, or lack thereof, is another obstacle in the way of product acceptance.

Lack of training

“The single biggest thing is agent training, advisor training,” Landry agrees. “In Quebec, we have a license in life and accident sickness insurance. That’s how it reads. But basically all of our training is on life insurance. We have very little training on the accident and sickness side.”

More specifically, both say advisors don’t know how to properly price or sell the product – attempting to sell coverage for a person’s entire stay in a long term care facility, instead of selling coverage to make up for a shortfall in savings – a problem which leaves many believing that LTC insurance is simply unaffordable.

“When you buy long term care insurance, you don’t buy it to cover anything. Nobody could ever afford it. What you do buy it for is to cover the gap between what you have and what you perceive you’re going to need,” Henderson says. “If the specialist or the advisor designs the product properly, based on a client budget, it can be affordable.”

With only a handful of companies offering the product today, it remains to be seen if Manulife’s departure from the market will hurt pricing or product availability.

Disappointing decision

“It’s disappointing,” says Sentinel Financial Group CEO, Fred Wing. “Is it going to hurt the long term care market? I think it does. Whenever you have one major company like Manulife pulling out, there is a gap. I don’t know if the consumer will understand that. The advisors will, but probably not the consumer.

“There are two other core companies,” he adds. “Desjardins and Sun. There’s no indication they’ll follow Manulife. I hope they don’t. Canadians require this product (to cover) the high cost of home care. Many families and children do not have the resources needed to keep parents in a certain quality of life as their health deteriorates.”

Similarly, Landry and Henderson both say LTC sales is a planning issue that families and advisors are unwise to ignore.

“Aging is a family affair,” Henderson agrees. “LTC insurance benefits both the purchaser and the family. It’s not so much a product as it is a tool for estate preservation. It also allows more care choices and more control. LTC insurance helps families control their future care needs.” Still, she points out that the product requires support if Canadians are to be adequately covered in the future. 

“Levels of government aren’t taking out national ads advising Canadians to start saving for their elder years or the need for long term care. Financial companies could use the RRSP season to push saving for aging, but they don’t. Seniors’ organizations who hold events fill the conference centres with travel companies, not with companies who could help with aging or long term care,” she says. “In other words, no one is pushing the need to plan.”