A Different Environment for New Policies

Sep 16, 2015

  1. Mr_Ed

    Mr_Ed Guru

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    New Jersey
    Here's a quote from an article published today on TalkAboutLTC.com:

    A Different Environment for New Policies

    New policies operate under a different set of regulations in most states, according to Scott Olson, co-founder of LTCShop.com in Yucaipa, Calif., and author of “The Guidebook for Making Long Term Care Insurance Easier.” While prospective buyers most likely have heard about and are concerned about LTCI rate increases, they probably don’t know that in more than 40 states insurers operate under strict rate-stability regulations that govern rate increases.

    For an insurer to get a new LTCI policy approved in a state that has a rate-stability regulation, the insurer must provide actuarial certification that it doesn’t expect any rate increases on this new policy series, even under what’s called moderately adverse circumstances or experience, Olson explained. He quoted Alabama’s regulation as an illustration of the new pricing oversight: “An actuarial certification consisting of the following: A statement that the initial premium rate schedule is sufficient to cover anticipated costs under a moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated.”

    “So, even if claims are, for example, 20 percent higher than they projected, that’s not going to be enough to request a rate increase,” Olson said. “It’s a big deal. Nobody in the industry is explaining this to people and they should be.”

    Olson cited the statistics on one insurer’s experience with rate-increase requests in California. The insurer has filed 40 requests since the state adopted rate-stability regulations in 2002; regulators denied all of the requests.

    The combination of better policy pricing and rate-stability regulations is both good news and bad news for buyers, he pointed out: “The good news is that the more conservative pricing dramatically decreases the probability of a rate increase. Leading actuaries estimate that a policy purchased today under these rate-stability regulations has a 12 percent chance of having a rate increase over the life of the policyholder. The bad news is that the more conservative pricing means that policies cost more today than they did 10 years ago.”

    You can read the article here:

    Dealing with Rate Increases | Talk About LTC
    Mr_Ed, Sep 16, 2015
  2. CALTCAgent

    CALTCAgent Guru

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    Just curious,

    If actuaries feel there is a 12% chance of having a rate increase, what do they feel the average increase will be ?
  3. ltcadviser

    ltcadviser Guru

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    12% chance? Can I bet the over?
  4. billberry12

    billberry12 Guru

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    "Bah humbug! I hate