The long term care insurance market has been redefining itself over the last 10 years. When this type of policy was first introduced the insurance companies had relatively little idea how to price it to be both competitive and profitable.

LTC policies are sold primarily by field agents who work for life insurance companies. When the baby boomer market began to receive prominent press coverage in mass media many of these agents began to pressure their respective companies to offer long term care insurance in their total sales portfolio.

On the surface, it would appear that most seniors would be anxious to buy a policy that provided cash benefits to pay for long term care expenses. But, this did not turn out to be the case at all partly due to the impression that medicare would step in to help offset the care giving expenses.

It is expensive for insurance companies to create and market any particular product line. In most circumstances, large numbers of sales together with solid renewal of premiums are mandatory in order to justify keeping the product available.

The unknown factor for something like long term care was in determining the true liability of  benefits that would be collectively paid out to the insured parties. In their anxiety to stay competitive, many insurance companies failed to price their products correctly resulting in excessive losses.

This has resulted in several companies (including a few very large ones such as Met Life) to curtail the sale of long term care policies. They eventually learned the inevitable lesson that committing to LTC marketplace requires first and foremost a sound and logically priced product line.

And now, Guardian Life (another well-respected life insurance company) has announced that it will be withdrawing from the LTC market by the end of 2011.  It is possible they may believe their ability to increase sales is not high enough to justify the cost of being in this business.

They have released a statement to the effect:

“Guardian, New York, has been selling individual LTC policies through its Berkshire Life Insurance Company of America unit since 2004.

Guardian had a small presence in the LTC insurance market to ensure that its financial representatives had a comprehensive portfolio of products to address the changing needs of their clients, says Gordon Dinsmore, president of Berkshire Life, Pittsfield, Mass. Its decision to leave the market was made after an extensive review of the business and decided to focus on its core life and disability income insurance business, he said.

Guardian has fewer than 9,000 LTC policyholders, and those customers make up less than 1% of the company’s customer base, he says.

Guardian could reevaluate its plans and decide to discontinue sales of LTC insurance before the end of the year, Dismore says.

Guardian will keep its promises to customers who already have Guardian LTC policies…”

The components of many long term care policies can appear quite complicated to the lay person… especially someone of senior age. In addition, most seniors are skeptical and suspicious when approached by sales personnel.

Perhaps Guardian, like many companies, believed that the sales process would go smoother than it actually has over the last several years.