There's a Difference Between Losing Money and Not Making As Much Profit As You'd Hoped

[Mr_Ed]

originally posted by Mr_Ed



I'm referring to the actuaries who presently work or who have previously worked for LTC carriers and have set premiums since the industry was established 40 years ago.

I'm not looking for agreement from you, I'm just stating the facts.

And no surprise, you still haven't answered my question from Post #6, which has been asked of you a number of times and just ignored.

The actuaries for the carriers are only half the picture.
The state insurance department actuaries have the final say in approving the policies and making sure they are safe for consumers to buy.
If you're saying the policies are priced wrong, then you are accusing the state insurance regulators (and their actuaries) of being derelict in their duties to protect consumers.

And, I have answered your question.

You asked: How does a carrier know if a policy series from 5 years ago is profitable?


My answer: Actuarial Science.

If you don't understand the answer then google it, go ask your upline, or take a course online. I'm not here to teach an insurance agent who's been in this business for 20 years how actuaries do what they do.

 

[Arthur Rudnick]

originally posted by Mr_Ed

My answer: Actuarial Science.

If you don't understand the answer then google it, go ask your upline, or take a course online. I'm not here to teach an insurance agent who's been in this business for 20 years how actuaries do what they do.

Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in insurance, finance and other industries and professions. Actuaries are professionals who are qualified in this field through education and experience

Call it what you want and continue to make every excuse in the world to justify your statements.

It was, and is the insurance carrier actuaries who first set premiums. And, over the past 40+ years we keep hearing how premiums were based on "incorrect assumptions". It's been 40+ years Scott, When are they going to get it right?

How many years do we have to keep hearing about "incorrect lapse rates"?
One would think after 40 years, the carriers would finally learn that lapse rates for LTC policies are 1% and not the 5%-6% numbers they have been using.

How many years will we continue to hear about low interest rates?
How many years will we continue to hear about policyholders using their policies for a longer period of time than anticipated?

What other industry would continue to price their products incorrectly and still stay in business?

I stand by what I said...............
If a policy series is introduced in 2015, and the average age of an applicant is 55, it is a minimum of 20-25 years before those policyholders are going on claim.

So, for 20+ years, the carrier is collecting premiums and not paying out any claims. That being the case, of course that policy series will be profitable.

You claim it's "Actuarial Science". I claim it "Common Sense".

 

[Ellie Kwent]

Interesting Post.

Arthur, are you saying carriers are still using 5 - 6% lapse rate assumptions? I don't think that's true.

Mr. Ed, when you say more recent products are profitable do you mean that not only are they currently profitable now but if we were to apply the current claims experience as a whole to more recent policies they would still be profitable?

 

[Mr_Ed]

Interesting Post.


Mr. Ed, when you say more recent products are profitable do you mean that not only are they currently profitable now but if we were to apply the current claims experience as a whole to more recent policies they would still be profitable?

the new products are using current claims data.
they have to.

an insurer can't decide to use claims data that is outdated or to assume a 4% lapse rate.

all new products have to be filed using the most recent actuarial data.

 

[Arthur Rudnick]

originally posted by Ellie Kwent

Arthur, are you saying carriers are still using 5 - 6% lapse rate assumptions? I don't think that's true.

No, that's not what I mean.
They have priced their policies to reflect the actual lapse rates of 1%, but we keep hearing about the incorrect assumptions as a reason for rate increases.

 

[Mr_Ed]

originally posted by Ellie Kwent




No, that's not what I mean.
They have priced their policies to reflect the actual lapse rates of 1%, but we keep hearing about the incorrect assumptions as a reason for rate increases.

Arthur still hasn't explained why he's convinced the current policies are priced wrong. All we get are vague, senseless comments like, "... they were wrong in the past..."

 

[scagnt83]

I agree that the industry has made some serious steps in the right direction. Of course I still tell clients they should budget in at least a 15% possible increase...

I question what assumptions they are using for Treasury returns. To me that is a big wildcard over the next 10 years. They have already been hammered by sustained low rates. What they are assuming they will get in 5-10 years, & if it turns out to be wrong or right, is crucial imo.

 

[Mr_Ed]

originally posted by Ellie Kwent




No, that's not what I mean.
They have priced their policies to reflect the actual lapse rates of 1%, but we keep hearing about the incorrect assumptions as a reason for rate increases.

OK, Arthur, there aren't that many parts to a LTCi premium.

We have:

1) lapse rate
2) interest rate
3) mortality rate
4) morbidity rate

Which of these is priced wrong in the policies that are available for purchase today?

 

[scagnt83]

We have:

1) lapse rate
2) interest rate
3) mortality rate
4) morbidity rate

Which of these is priced wrong in the policies that are available for purchase today?

#2 is the biggest wild card imo. Maybe you have more insight into what assumptions they are using for 10+ years out.

 

[Ellie Kwent]

Arthur, does that mean you have stopped selling LTCI?