For Elderly Needing Insurance, It’s Same Old Story

What happens when insurance rates shoot up and policyholders find they can’t afford them?

The easy answer would seem to be that sales drop.

Well, sometimes yes and sometimes no. It depends on how important buyers think it is to have the insurance in question. If they feel it important enough, they will stretch their pocketbooks.

But, for the most part, they are not doing that with earthquake insurance. When I wrote a few weeks ago that quake insurance sales have been slipping since the 1994 Northridge quake, and Californians are increasingly ignoring the sizable quake risk, reader reaction was pointed.

Most of the 40 people who contacted me were unapologetic about not keeping their quake insurance.

They said it has grown too expensive, and an Orange County Allstate agent said she wasn’t pushing it because she couldn’t honestly claim it was a good deal.

Several readers also reported they recently had been hit with hefty increases in their premiums.

Mark Leonard, spokesman for the state-run California Earthquake Authority, confirmed that changes in rates were approved in December and started showing up on renewals in May.

While he said there has been a statewide average rate decrease of 4.5%, some buyers got large increases because of a reassessment of risks in various locales. In one part of Santa Barbara County, the increase was 100%.

That would drive many people away, and, remember, average prices statewide have gone up

100% to 200% since Northridge while coverage was reduced.

Many experts believe these changes reflect a more accurate evaluation of quake risks. So maybe the sky-high cost is justified. But with no big quake in five years, the public is often not in the mood to continue buying.

With long-term care insurance--nursing home, convalescent home and home care--however, popular views are different. There, as the population ages, fears of the future dictate pocketbook stretching.

Still, many elderly people are resentful.

Robert Meier of Oxnard recently contacted The Times about his rate hike.

“I am protesting the outrageous increase for . . . my home care policy,” Meier wrote. “When I took that policy [with American Travellers] in 1996, the [annual] premium was $1,214. In 1998, [it] was raised to $1,492.80. In 1999, [it] was raised again to $1,719.89. [That’s] over 41% in just two years. . . .

“I am 83 years old, and my wife is 80 and handicapped. I have not used this policy at any time but could possibly need assistance in the near future. But I cannot continue to pay this increase . . . being on a small fixed income.”

Meier said he and his wife, who will celebrate their 60th wedding anniversary this summer, receive monthly income, after taxes, of about $1,500, and when they meet all their expenses, they seldom have as much as $100 left.

Meier’s home care policy provides a maximum benefit of $75 a day for two years.

The Meiers also have bare-bones nursing home policies costing $1,400 a year, which give each person $50 a day in such care for three years.

Now, despite his pleas that he cannot afford to pay more, Meier has sought a new home care policy, and found that Bankers Life and Casualty may be prepared to sell him one at about the same price as his new Travellers premium, but offering $100 for care each day for two years, rather than $75.

Meier appealed to the California Department of Insurance for help, saying he was told by Travellers that the department approved the increases.

But department spokeswoman Dana Spurrier said this isn’t true. She said rate regulation does not apply to long-term care policies, and all a seller of such insurance needs to do is file rates with the department.

Travellers is owned by Canseco, and its spokesman, Jim Rosensteele, said claims against home care insurers have been growing above all expectations, necessitating the sharp increases.

For one thing, Rosensteele noted, many services that used to be provided only in nursing homes are now available in home care, so the demand for that, and the claims against it, are soaring.

Sales, he said, have been growing at a strapping 20% a year.

He mentioned that rates have been increasing fastest in California, Georgia and Florida.

It may be that increases are justified, but they are falling, in large part, on people like the Meiers who can least afford them.

Some older people are in such straits that they become reliant on state aid. In fact, long-term care is one of the fastest growing government expenses in California.

Meier’s insurance agent, Neal Sears of Ventura, told me his options are narrow.

“There’s not that much difference between companies in price,” he said. “I could probably go out and get him something for a little less, but then it would soon skyrocket. And I don’t like anything with less than an A rating.

“The companies have tightened up on underwriting. They really check out the people they sell to, but once you have a policy, they cannot come up and raise your premiums based on age alone. They’re not supposed to take the age into consideration, except the age at purchase.”

But, of course, the insurance companies are adept at finding ways to raise rates, and skilled at blocking the passage of laws that restrict their ability to do so.

A bill by state Sen. Joseph Dunn (D-Garden Grove) that would require companies selling such policies to guarantee that individuals would not have their premiums raised, already has been weakened.

I’m not sure it is practical to ban all rate increases no matter how long someone lives. But with an aging population of often scant resources, this is an issue that should command attention.

Ken Reich can be contacted with your accounts of true consumer adventures at (213) 237-7060 or by e-mail at ken.reich@latimes.com.