Regulators eye effects of LTCI rate increase

The consumer groups said that if, at the time an LTCI policy was issued, the issuers were counting on a 60 percent loss ratio over the life of the policy, “the lifetime loss ratio for increases should be at least 85 percent for individual coverage and 90 percent for group coverage,” the consumer groups said. “Insurers should be required to share the pain of these rate increases with their insureds. Penalties should be severe enough to discourage any future pricing errors.”

The North Carolina Department of Insurance also talked about loss ratio minimums in their comments on the model.

The 60 percent factor “should be replaced with the greatest of 60 percent or the lifetime loss ratio based on the original pricing assumptions,” the department said. “Companies may have used assumptions that generated lifetime loss ratios of 70 percent or higher. It does not seem fair to consumers to use something less than the original lifetime loss ratio in evaluating a rate revision request.”

Mark Alberts, an actuarial consultant, said LTCI policyholders, like traditional life policyholders, should not be subject to interest rate risk.

“The company should not have the opportunity to raise rates for interest rate charges it chose not to reflect at the time the business was issued,” Alberts said.

Claude Thau, an LTCI specialist based in Kansas, suggested the carriers could keep the ability to raise rates while addressing concerns about interest rate change pain by having carriers tell consumers more about investment income assumptions.

“With the help of a qualified financial advisor, many prospects can at least partly understand the additional risk they face if they purchase from an insurer assuming a higher investment yield,” Thau said.

See also:

• LTCI rate wiggle room: How much is enough?
• Connecticut posts LTCI rate filings
• Senior panel to consider LTCI model update