Is Long Term Care Insurance Unsustainable?

[csalter]

I have been wondering why insurance many insurance companies have stopped selling long term care partnership policies in California.

I have been looking at rate increases for long term care policies in California and noticed something. The rate history request includes the policies not only in Calfornia but all other states as well. I notice that pretty much all of the other states seem to grant the approvals for rate hikes and do so for precisely what the insurance company wants. However California seems to be a lot more discerning before approving rate hikes. If companies were asking for rate increases of say 18%, it was often not approved on many of the requests. I notice on Bankers Life policies in particular that they might ask for 40% and 30% approval and California approved them for less and even denied some of the requests entirely for individual policies. I did not see any partnership policies in California given an approval for a rate increase.

I just found this interesting. I know it doesn't mean they will never go up, but it is nice to feel that someone is truly overseiing this stuff and not just rubber stamping the increases for the insurance companies.

 

[Arthur Rudnick]

Originally Posted by Mr_Ed

Why is this a problem?
What difference does it make if the product was not
priced correctly 15 years ago? All that matters is if it's priced correctly NOW!!!!

Here's the problem:
Incorrectly priced policies from 10, 20 & 30 years ago are now requiring huge rate increases. Today's prospective purchasers are hearing about these increases and many are being scared off from purchasing policies today.

And, are you sure that today's products are priced correctly? Did policies that were priced within the past 5 years take into consideration today's low interest rates?

The industry was told back in 2002 when the national LTC Model Act was introduced that carriers have finally priced their products correctly and the chance of future rate increases were now minimal.

How'd that work out?

 

[Jsmith56]

I have been wondering why insurance many insurance companies have stopped selling long term care partnership policies in California.

I have been looking at rate increases for long term care policies in California and noticed something. The rate history request includes the policies not only in Calfornia but all other states as well. I notice that pretty much all of the other states seem to grant the approvals for rate hikes and do so for precisely what the insurance company wants. However California seems to be a lot more discerning before approving rate hikes. If companies were asking for rate increases of say 18%, it was often not approved on many of the requests. I notice on Bankers Life policies in particular that they might ask for 40% and 30% approval and California approved them for less and even denied some of the requests entirely for individual policies. I did not see any partnership policies in California given an approval for a rate increase.

I just found this interesting. I know it doesn't mean they will never go up, but it is nice to feel that someone is truly overseiing this stuff and not just rubber stamping the increases for the insurance companies.

I don't know about that. The recent decision which denied the attempt to change the Penn Treaty rehabilitation into a liquidation was quite an indictment of insurance departments -- and LTC actuaries -- when it comes to rate increases. All of the different decisions on rate increases in different states don't necessarily serve policy owners well. Sure, a state may deny or reduce a requested increase, but whether that is ultimately good is debatable. The result is that policy owners in other states pay more for the same coverage, the company takes in less premium than what is needed, and it may necessitate another rate increase.

Any company that under-prices a product -- intentionally or otherwise -- is going to have trouble down the road. You have to hope that the company is big enough to withstand the problem, or is diverse enough, or didn't under-price too many products. If not, you aren't left with too many options -- increase rates or decrease benefits.