Insurance regulators are talking about whether they can, and should, use a flexible, complicated new approach to analyzing how much money insurers should reserve to support long-term care insurance (LTCI) policies.
Two arms of the National Association of Insurance Commissioners (NAIC) — the Long-term Care Actuarial Working Group and the working group’s parent, the Health Actuarial Task Force — looked at the idea of using “principles-based reserving” (PBR) for blocks of LTCI business earlier this week in Louisville, Ky., at the NAIC’s summer meeting.
Al Schmitz and Paul Morrison of the American Academy of Actuaries have developed a demonstration model that helps actuaries analyze how LTCI reserves might perform when the likelihood that the insureds will file claims and the likelihood that the insureds will keep their policies change in a random way. The actuaries have also been working to build changes in interest rates into the model.
The LTC Actuarial Working could rate developing PBR requirements for LTCI as an important job in its list of 2015 charges. The current list of charges calls for the working group to start developing a PBR system for LTCI products.
The NAIC and its members are already applying PBR methods to life insurance.