General Electric Co is setting aside one of the largest amounts ever to cover po...
NEW YORK - General Electric Co is setting aside one of the largest amounts ever to cover potential losses on policies that provide long-term care in nursing facilities and patients’ homes. But insurance experts are concerned that may not be enough.
The costs, which far exceeded GE’s estimates, sent its shares tumbling, spurred an investor lawsuit and prompted the U.S. Securities and Exchange Commission to investigate. For comparison, Humana Inc has set aside $77,282 per policy, while Unum Group has set aside $10,614, Audit Analytics said.Those amounts are less than the cost of one year’s stay in a private nursing-home room, which averages $92,376 in the United States, the U.S. Department of Health and Human Services said.
“I think it is impossible to know whether the $15 billion is enough,” Joseph Belth, professor emeritus of insurance at Indiana University, who has written extensively about long-term care policies, told Reuters after reviewing GE’s disclosures. Increasing reserves generally reduces the risk of future losses, but “sometimes reserves signal a deficiency in a block of policies that reoccurs in the same block,” Caron said. “We view long-term care insurance as a very risky product.”
Others noted GE lost out on premium increases that rivals got by moving quickly when long-term care costs became apparent.
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