Rate Increases on LTCi Policies
Our office receives several calls a week from our producers regarding rate increases on their client’s existing policies. Rate increases are happening across the board from multiple carriers.
Here is some insight on why they are happening and what is being done to protect the new long-term care insurance consumer today. According to recent data from the National Association of Insurance Commissioners (NAIC), the long-term care insurance market has evolved significantly since its introduction in the 1960’s. In the past decade, the market has grown from covering less than three million lives to now covering nearly eight million lives. Long-term care insurance policies of today, incorporate various long-term care supports and services including home health care, respite care, hospice care, personal care in the home, services provided in assisted living facilities, adult day care centers and other community facilities. As our population ages, the need for long-term care services will become more important and require innovative new approaches. There are two key factors driving product development: mortality risk and longevity risk. In recent years, focus has shifted to address longevity risk as baby boomers reach retirement age. People are living longer and increasing the need for long-term care services in these extra years. Longevity and persistency assumptions on early LTCi products have proven to be inaccurate. Insurers underestimated how long people would live and how many people would drop their coverage over time. Another unknown at the time, was the extent of impact that cognitive memory disorders, such as Alzheimer’s Disease would have. People can live a long time with dependency needs from Alzheimer’s disease and similar memory issues. These inaccurate assumptions have led to rate increases with most of the major insurance carriers at least once. State insurance regulators are working to enact protections related to changes in product design and to address historical problems encountered in the marketplace. The NAIC adopted amendments to the Long-Term Care Insurance Model Regulation (#641) in August 2014 aimed at improving rate-stabilization provisions. The NAIC is producing and evaluating proposals related to LTCi rate stability for existing policies; developing a new mortality standard for long-term care reserves based on the 2012 Individual Annuity Reserving Tables; developing new tabular voluntary lapse-standard for long-term care reserves; working with interested parties to determine the appropriateness of a principle-based frame-work for LTCi valuation; developing regulatory guidance for premium deficiency reserve calculations and reviewing the newly required Actuarial Guideline (AG51). This foresight and tightened regulation bring great news to the new long-term care insurance consumer of today. Working from historical data – including claims experience and persistency tables – carriers can better project where rates should be and forgo future rate increases. Despite these rate increases on older policies; long-term care insurance remains one of the most cost-effective ways to protect your retirement savings from the high price of dependency. For more information on the policies available in your state, please call 1-800-945-1953.
PS: Kiplinger published this recent article with tips on this issue, How to handle a rate increase to your long-term care premiums