By asking the following questions, regulators can learn about the LP LTCI marketplace, helping them to determine if regulation is necessary and to find creative solutions.
1) What limited premium payment periods are intended to be offered with the policy form being submitted for approval?
2) What nonforfeiture features will you offer to limited premium payment period policyholders? Which will be automatically included? Which will be “mandatory offers”? How will you disclose nonforfeiture risks to prospect buyers?
3) Certify that your policies are guaranteed to be “non-can” once they are paid-up, or explain why a policy should be approved whose “vanished” premium may resurrect.
4) What percentage of sales (on both a policy-count basis and a premium basis) do you anticipate will result from limited premium payment period policies? How does this compare to LP LTCI sales on earlier products? Explain any difference.
5) How will your policies be grouped when considering in-force premium revisions?
6) Identify which experience factors (for determining the possible need for in-force premium increases under lifetime premium policies) might reflect experience under limited pay policies and vice versa. Justify your approach.
7) What additional experience factors, if any, are needed to consider rate increases for LP LTCI, as opposed to lifetime premium policies?
8) Certify that adverse deviations on limited pay LTCI will not contribute to rate increases on lifetime-premium-payment-period policies or explain why we should approve a procedure that could result in such a cost for lifetime premium policies.
9) How might adverse deviations on paid-up limited pay LTCI policies contribute to rate increases on limited pay policies which are not yet “paid-up”? Justify your approach.
10) Explain the active life reserving methodology. How are reserves released for paid-up policies whose insureds might have died but can no longer be found? Certify that the reserves should be adequate despite moderately adverse experience.
11) Explain the Risk-Based Capital factors being applied to limited pay LTCI and why the RBC should be adequate.
12) Describe the typical circumstances in which your company sells limited payment period LTCI and any special disclosures you intend to use. Would you suggest any changes to the Suitability Statement for LP LTCI?
13) Recognizing that the policy may have been paid-up for a long time by the time a claim might occur, how does your company increase the likelihood that families will know about the policy when the need for LTC arises?
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 27, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.