Bullet: Claude Thau Has Your
September 30, 2016
Comment: Erroneous research
that leads to damaging media often goes uncorrected.
Not this time. Details
BULLET: CLAUDE THAU HAS YOUR
Comment: The Boston College
Center for Retirement Research (BC CRR) does not have a very high opinion
of private long-term care insurance.
They concluded, for example, that people are better off planning
for Medicaid than buying LTCI. The national media slavishly repeats BC
CRR’s conclusions as if they were unassailable.
That negative publicity has hurt LTCI producers and denied needed
LTC protection to untold numbers of innocent consumers.
identified and rebutted errors in the BC CRR research in previous LTC
Bullets, including “LTC
Bullet: How Careless
Economists Boosted LTC Risk,”
published December 12, 2014 and “LTC
Bullet: Another LTCI Hit Job?,”
published October 9, 2015. Read
those two Bullets and you’ll
come away with no uncertain idea about our opinion of BC CRR’s sloppy,
ideologically biased, inaccurate, misleading and highly damaging work.
I guess you could say, we’re the “bad cop.”
Thau is the good cop. Claude
reached out to the economists at BC CRR and invited them to undertake a
rational dialogue about the same two research papers we critiqued in our LTC
Bullets. Calm, cool and collected, Claude respectfully challenged
their findings and positions. He
made them aware of newer data and other angles from which to view the data
that only an accomplished actuary with expertise in the specialized field
of long-term care would know. He
patiently interacted with the BC CRR researchers for months.
are all now privileged to learn what Claude Thau discovered and how the BC
CRR researchers responded to the information he provided. The Society of Actuaries published Claude’s article titled
Response to RecentLapse Research”
in the current (August 2016) issue of Long-Term
Care News. I strongly
recommend that everyone concerned about accurate LTC research and the
future of private long-term care insurance read this important article in
full. What follows are
excerpts to give you the flavor of the piece, and I hope, to motivate you
to read it.
from Claude Thau, “A
Response to RecentLapse Research,
Long-Term Care News, Society of
Actuaries, August 2016: https://www.soa.org/Library/Newsletters/Long-Term-Care/2016/august/ltc-2016-iss-42-thau.aspx.
(Footnotes omitted, but you can find them in the original.)
Boston College Center of Retirement Research (BC CRR)has published
articles relating to long-term care insurance(LTCI), including a November
2014 study, ‘Long-Term Care:How Big a Risk?’ and an October 2015
study, ‘Why Do People Lapse Their Long-Term Care Insurance?’” . . .
these studies published conclusions that I and other LTCI professionals
consider unjustifiable. When asked by several people to comment on these
studies, I engaged the researchers to try to assure my comments are fair
and intelligent. I contacted the researchers in May 2015 regarding the
2014 study and in November 2015 regarding the 2015 study and I can report
the following progress:
The researchers intend to update their 2014 study to address its reliance
on rehabilitation data. It is not clear whether the revised paper will
clarify or modify other information which concerned LTCI professionals.
On May 13, 2016, after considering my concerns and speaking with Marianne
Purushotham and Cindy MacDonald (experts on the SOA lapse studies), the
researchers published a brief revising their 2015 study. The researchers'
brief has bridged our differences as to lapses, but their comments about
cognitive lapses still seem to be unjustified.
The researchers have stated that their future papers regarding LTCI will
be vetted with LTCI industry experts prior to publication.
New related research is being contemplated by the SOA LTCI Section
Council.” . . .
CRR's 2015 report was widely reported. People who read that report think
that LTCI policyholders are 50 percent more likely to lapse than data
suggests (and as noted above, today's buyers are even less likely to
also are likely to think people lapse because of being cognitively
impaired. They may falsely conclude that insurers take advantage of these
policyholders and that regulators do nothing about it.
urged the researchers to mention the safeguards against cognitive lapses.
They responded, ‘We are aware of these provisions but are unable to
incorporate their effects in our analysis.’ Although I told them I was
not asking that they ‘incorporate their effects’ but rather that they
simply acknowledge the efforts, they chose, once again, not to mention
those provisions in the revised brief.
researchers' November 2014 paper, ‘Long- Term Care: How Big a Risk?’
essentially concludes that many more people need LTC than was previously
thought, but that the need lasts a short time, so LTCI is not valuable. My
primary concerns are that the researchers' analysis is based primarily on
rehab, which of course is common and short, but has nothing to do with LTC.
“Moreover, it is not clear that they have included home care and
assisted living facility care in their analysis.
interaction with BC CRR highlights the value of actuaries fostering
dialogue with professionals performing related work. Timely discussion can
contribute to clearer conclusions and more accurate consensus.
Thau is president of Thau, Inc. He isa consultant and wholesaler, and he
Comment: We all owe a debt of
thanks to Claude Thau for donating so much of his valuable professional
time to reach out to the Boston College researchers with sincerity, good
will, and exceptional expertise. Thanks
also to the Society of Actuaries for its work on behalf of long-term care
insurance and for publishing Claude’s article.
If truth does win out in the end, it will likely be because of the
hard work, usually unrecognized and under-appreciated, of these dedicated