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Connecticut OKs LTCI Rate Increases

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Connecticut Insurance Commissioner Thomas Leonardi has approved a 41% rate increase for 3 blocks of long-term care insurance (LTCI) policies.

Leonardi has given Metropolitan Life Insurance Company, a unit of MetLife Inc., New York (NYSE:MET), permission to apply the increases to a block of LTCI business 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 reinsurance agreements with TIAA and TIAA-CREF Life.

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.

In June 2010, there were 626 policyholders and 39,114 nationwide.

Trend told Connecticut officials 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, and claims have been somewhat higher than expected.

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.

In Connecticut, an insurer asking for permission to increase LTCI rates must show that the higher rates will comply with a requirement that claims payments equal at least 60% of premium payments, Leonardi says in a discussion of his ruling.

Regulators also must look to see whether the increase requested is excessive, inadequate or discriminatory.

The increase appears to be reasonable, adequate and not discriminatory, Leonardi says.

“A concern frequently raised by insureds and the general public is that the applied for increases would not be affordable for the renewing policyholders,” Leonardi says. “Affordability, however, is relative to each person and subjective, and although of overall concern, is not a standard for rate review within the statute or standard actuarial principles.”