Connecticut insurance regulators are skeptical about long-range long-term care insurance claim projections, but they are open to letting an insurer cite low investment returns as a reason for a rate increase.
The regulators talked about those issues and others in their response to a recent LTCI rate increase survey.
The Long-Term Care Pricing Subgroup, part of the Kansas City, Missouri-based National Association of Insurance Commissioners, organized the survey to see what subgroup members and other interested parties think about LTCI rate increase requests.
LTCI issuers have complained about seeing some states apply much different standards for reviewing increase requests than others.
The Connecticut Insurance Department has rejected or reduced many requests that other states have granted in full. In some cases, Connecticut actuaries have argued that an issuer’s Connecticut claim experience has been better than the national average, and better than originally expected.
The organizers of the new NAIC subgroup survey asked the survey participants how regulators should react when actual LTCI claims experience has been good, but consultants say the experience over a 40-year to 50-year period will be poor.
Connecticut regulators said in their response that reconciling the gap between the actual experience and consultants’ long-term projections may not be possible.
“The carriers themselves are having significant difficulty with accurate projections, especially towards the tail of those projections,” the regulators write, according to a collection of the responses posted on the subgroup’s section of the NAIC website.
But Connecticut regulators replied “yes” in response to a question about whether insurers could mention lower-than-expected investment returns in rate increase requests.
Connecticut appears to be more open to use of investment returns as a justification for LTCI rate increases than a representative for the American Council of Life Insurers and America’s Health Insurance Plans who has been following the subgroup’s work.
The rep for the ACLI and the AHIP said that, under the terms of the NAIC’s model regulation for LTCI, “actual investment returns would have no bearing on rate increases.”
California regulators said consumers buy LTCI partly because they assume insurers have insurance expertise. “Passing investment risk back to the policyholders should have been disclosed prior to sale,” the California regulators said.
The Center for Economic Justice, a group that speaks for consumers in NAIC proceedings, said regulators’ need to think about the goals of rate increases, and how to allocate risks between investors and policyholders.
“Which of these groups should be responsible for the insurers’ errors in various pricing assumptions?” the center asked.
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