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The Ox Gores Back

Financial planners at our firm are not fans of long-term care (LTC) insurance, for the reasons Anna Pfaehler stated in her recent Sentinel cover story. We knew the article would draw a reaction, and it did.

A long-time reader asked us to clarify whether premiums could increase on his outstanding policy. (Yes, they can, if the company raises premiums as a group, but the individual policyholder’s health or claims history usually will not affect his future costs.) An estate planning attorney called the latest Sentinel “the best ever” and added, “It’s unusual to see an article take such a clear and perhaps controversial position as was done in the long-term care article. Well done!”

People who sell LTC coverage felt differently. One man told our receptionist, “This woman should never be allowed to write a word” and demanded that we stop mailing Sentinel to him.

Arthur Rudnick of New York Long-Term Care Brokers, Ltd., in White Plains, wrote a three-page response that we will publish if he grants permission. Most of the letter restates, with evident passion, the industry’s arguments in favor of the product. It acknowledges but does not really address Anna’s main objection (which I share), which is that the product cannot affordably spread risk if, as expected, most policyholders ultimately make claims.

Most LTC insurance agents I have encountered truly believe in what they do. Mr. Rudnick seems to be no exception. The problem with true believers is that they often do not tolerate heretics very well. Financial planning dogma says long-term care is a risk that can be effectively addressed with insurance; our heresy is to conclude that, fundamentally, it is not.

Thus Mr. Rudnick’s letter to Anna opens with: “You are so off-base on this product, I’m surprised that a Financial Planning Group would allow you to have this article published and embarrass not only yourself, but your publication as well.” It closes with: “Your article is blatantly misleading and misrepresented and it’s very clear that you have no clue what LTC insurance is about. You therefore should not have the platform to advise anyone on a subject that you are so misinformed on.”

True believers have a great capacity to ignore contradictory information. In our view, the need to price LTC insurance competitively leads companies to understate premiums up front and raise them later. This, Mr. Rudnick acknowledges, occurred with policies sold a decade or more ago. But he informs us that today’s policies are “priced correctly.”

The point is not to rebut the LTC insurance community’s rebuttal of Anna’s article. Their arguments are what they are, and time will tell whether they are correct. Experience has given us enough humility to know that we can be wrong. Certainly we acknowledge that other financial planners do not often share or express the negative views we hold on LTC coverage. Maybe, as Mr. Rudnick suggests, they know something we don’t know, but I suspect many just don’t want to deal with the LTC insurance community’s backlash.

We owe our clients (and readers) our honest opinions and an explanation of how we arrive at them. Anna’s article offered just that. Such work will always have a platform at our firm.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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One Response to "The Ox Gores Back"

  • Jennifer DiIorio
    July 15, 2009 - 8:44 pm

    I found Mrs. Pfaehler’s report on LTC insurance both well-written and illuminating. To borrow a turn of phrase from the bard it seems to me that those who are reacting with such vitrol and hatred “doth protest too much”. They know as well as Mrs. Pfaehler does, that they are heading down a destructive path and so are simply attempting to counter all criticisms not with well thought out rebuttals of her arguments, but with childish personal attacks. Bravo Mrs. Pfaehler and Bravo to the Sentinel!