Interest rates have to go up sooner or later, and rising rates should greatly decrease the risk of future increases in private long-term care insurance (LTCI) prices.
Jesse Slome, executive director of the American Association for Long Term Care Insurance (AALTCI), makes that argument in a commentary on the state of the LTCI market.
LTCI policyholders have faced long waves of premium increases in recent years. For some policyholders, the monthly premiums have doubled.
Record low interest rates have contributed to other pricing problems, by reducing insurers’ investment yields, Slome says.
Rising rates will help improve the insurers’ yields, Slome says.
He says insurers also are designing and pricing the newly issued products more conservatively, based on years of actual LTCI claims data, rather than on theoretical ideas about how LTCI products might work.
Regulators are doing more to make LTCI issuers justify rates and show that the rates provide a buffer against moderately adverse conditions, Slome adds.
“No one can predict what the next 10, 20 or 30 years will look like but the conditions that created a need for rate increases on older policies just do not exist today,” Slome says.