With Experience Comes Knowledge.  Are the LTCi Carriers Getting it Right? 

Presented by Leonard Berthelsen

We certainly would like to think that knowledge comes from experience and that we are onto a brighter future with long term care insurance.  A recent article on the website LifeHealthPro.com outlines many of the issues affecting LTCi carriers and the impact that it has on policy design and pricing.  The article outlines a recent study that was completed using Society of Actuaries (SOA) data from 2000 through 2011.

In that data, of 172,000 claimants of long term care benefits representing $7 billion in claims revealed some important information such as, that although actual claims for LTCi policies with lifetime benefits may be higher than those for policies with limited benefits, the claims incidence for policies with limited benefit periods is actually higher than the incidence for policies with lifetime benefits.” This shows that the concern for lifetime benefits from the carriers’ perspective may have been too conservative and might open the door to future benefits being available in longer durations. 

Another excerpt from the LifeHealthPro article that dealt with substandard issued LTCi policies was, that despite the fact that “the substandard risk category paid more for coverage than policyholders in the standard or premium category, they are less likely to file claims than policyholders in the standard category.”  The conclusion drawn here from the claims data compiled by the SOA is that the carriers pricing again may have been too conservative in relationship to their overall risk for this class of applicants. 

Are the carriers using this new found “tool” (claims data)?  In my opinion it appears that at least some of them are.  New generation of LTCi products seem to be designed based on some of the data on claims and benefit utilization, and that is a good thing.  As the carriers better understand the data put into their pricing model, new versions of LTCi will be introduced and the future certainly looks brighter today than 5 years ago.  LTCi products related to linked benefits, life insurance and annuities all have had provisions and riders recently developed to address the long term care event that many of its policyholders will likely face. 

As is the case with most industries that have government regulations and oversight, we have to have the regulators onboard with change as well.  Having them recognize the need for improvement in plan design, pricing and overall features will be a big step for an industry wanting to succeed, but also needing to be profitable.  Regulators in recent years have had to wrangle with the issue of carrier rate increases on previously sold LTCi plans.  This is not an easy task for them or for the carriers.  No one likes rate increases and it is certainly never easy explaining this to the policyholder.  Maybe some of this data will help the carriers get it right. 

Will we see a resurgence of interest from carriers to enter the LTCi market place that left in previous years, or new carriers that see an opportunity for new growth?  Time will tell, but one thing is for certain, the more knowledge and experience that a carrier and an industry has, the better the products and better the pricing.  It’s funny how the very reason why we sold LTCi is what is giving us the glimmer of hope for a brighter future CLAIMS!

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