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September 05, 2012 at 09:53 AM
California seems to be on its way to getting a new long-term care insurance (LTCI) rate stability law.
Washington state has added a little flexibility to the rules for the consumer price index-linked inflation protection features sold with LTCI policies that qualify for the state’s Long-Term Care Partnership program.
Regulators at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., are looking at wave after wave of LTCI rate increase requests and thinking about putting new and sharper teeth in the NAIC’s rate stability model.
It’s hard for me, a reporter with no paranormal powers, to know what’s really going on at the LTCI carriers. Maybe the LTCI units really are doing fine, and are on track to do fine, and the parent companies are cutting back on selling LTCI simply because of fears about the future, or paranoia about media coverage of competitors in the LTCI market, or some kind of clever plan to kill off the old type of LTCI and bring in a new, more profitable type of LTCI coverage.
But, to me, it doesn’t look as if insurers are flooding into the LTCI market to take advantage of the high new prices. It looks as if rigid restrictions on rate increases are contributing to scaring insurers away from the market altogether.
Certainly, insurers should not charge consumers through the nose to assume risk what the insurers’ privately believe to be hyped-up risk, then, effectively, back out of the deal when it turns out that the “hyped-up risk” has turned out be a real risk that is generating more claims than expected.
If you sell life insurance, be prepared for policyholders to die.
If you sell LTCI coverage, be prepared for the policyholders to get old, hang on to their policies, and have trouble with 2 or more activities of daily living.
But, in the long run, it looks as if LTCI carriers might be facing the same general problem that society as a whole is facing: Rigid, sweet-sounding promises based on overly optimistic projections about the economy.
