The Connecticut Insurance Department has scheduled a hearing on a 41% rate increase proposed for a closed block of long-term care insurance (LTCI) policies for 9 a.m. Jan. 11.
Metropolitan Life Insurance Company, a unit of MetLife Inc., New York (NYSE:MET), is asking for the increase for 3 separate but related blocks of LTCI business: A block it administers for Teachers Insurance and Annuity Association (TIAA), New York; a block it administers for a TIAA affiliate, TIAA-CREF Life Insurance Company; and a block of policies it has assumed through the reinsurance agreements with TIAA and TIAA-CREF Life.
The proposed rate increases could affect 626 policies in Connecticut and a total of 39,114 policies
The policies were sold from 1991 to 2004 through direct-response campaigns, without the help of agents or brokers, but the applicants did go through a medical underwriting process, Jonathan Trend, an actuary at Metropolitan Life, writes in an actuarial memorandum submitted with rate increase application.
Trend says the TIAA and TIAA-CREF Life LTCI policies suffer from a problem that has plagued many other blocks of LTCI business: The policyholders are much more likely to keep the policies in force than the actuaries had expected.
“Actual voluntary lapse rates have been lower than that assumed in pricing,” Trend says. “Mortality rates have been similar to that assumed in pricing. Morbidity levels have been slightly worse than assumed in pricing. The combined result of past experience and future projections based on current assumptions is a loss ratio that far exceeds both the original and state minimum requirements.”
The rate increase request Metropolitan Life has submitted is the first made in connection with the policies since they were first issued, Connecticut department officials say.
If the department approves the increase, the the average annual premium in Connecticut would increase to $2,341, from $1,660, or about $57 per month, officials say.
Metropolitan Life must give policyholders a 60-day notice of any approved rate change, and it has told regulators it would offer policyholders options for coping with the effect of a premium increase, such as an option to reduce the benefit amount to help hold down the amount a policyholder must pay.
Metropolitan Life is sensitive to the effect any rate increase has on its customers, a company representative says.
“The actual and projected claims experience is exceeding original assumptions on MetLife’s TIAA-CREF individual long-term care insurance policies, and a rate increase is warranted in order to ensure that we deliver on our promises to all our insureds,” the representative says.
Metropolitan Life announced in November 2010 that it would no longer sell new long term care (LTC) insurance policies in either the individual or group markets after the end of 2010.