The Commonwealth Court in Pennsylvania has approved petitions to liquidate Penn Treaty Network America Insurance Company and American Network Insurance Company, with policyholder claims set to be paid through the state guaranty association system subject to statutory limits and conditions.
“After a long and difficult eight-year legal process, the Court’s decision to approve the liquidation recognizes the companies’ financial difficulties are too great to be remedied, and that consumers are best protected through the state guaranty association system,” Pennsylvania Insurance Commissioner Teresa Miller said in a press release issued by the Pennsylvania Insurance Department.
Miller said in the release that the two companies have approximately 76,000 policyholders nationwide, with 9,000 residing in Pennsylvania. More than 98 percent of Penn Treaty and American Network’s policies are long-term care insurance.
Long-term care insurance has presented challenges to insurers across the U.S. in the past few years, according to the release. This is because policy pricing can be insufficient as claims exceed expectations and provide low investment returns due to incorrect assumptions about the number of policyholders who would drop coverage and would utilize policy benefits, as well as the cost of providing benefits, the release added. Pricing deficiencies and financial losses have led many long-term care insurers to seek large premium rate increases or to leave the market.
In the case of Penn Treaty and American Network, the Pennsylvania Insurance Department determined the magnitude of additional premium rate increases needed to resolve the companies’ financial difficulties, which exceeded 300 percent on average, would harm policyholders and would not be permitted by state regulators, the release said.
“Policyholder claims will continue to be covered by the state guaranty association system pursuant to law,” Miller said in the release. “Policyholders should continue to file claims as they have been in the past, and must continue to pay their premiums in order to be eligible for guaranty association coverage.”
Source: Pennsylvania Insurance Department