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NAIC Developing Executive-Level Committee to Harmonize LTCI Rates

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The National Association of Insurance Commissioners is developing a new executive-level committee that will try to harmonize long-term care rate increases across states, according to remarks from Eric Cioppa, NAIC president and Maine superintendent of insurance.

Cioppa spoke at a regulatory conference in Washington March 6 to discuss key initiatives of the group, and briefly raised the issue of long-term care reserves and rates, and how the NAIC was handling them. He also briefly spoke with ThinkAdvisor on the sidelines of the Networks Financial Institute-sponsored conference about it.

The committee would try to establish a uniform practice for granting rate increases to LTCI blocks. Issuers of the policies in the blocks say they are struggling to take in enough premiums to support the costs of paying the policy benefits.

(Related: Regulators May Form a Multi-State LTCI Rate Review System)

Assumptions made by actuaries in previous decades did not factor in a long period of low interest rates, longevity, cost of care and illnesses associated with living longer, the issuers say.

A review of issuers’ rate filings shows the issuers are limiting many rate increase requests to amounts the issuers hope state regulators will grant. The issuers often assert that their claims experience and projections justify much larger increases — sometimes over 200%, or even 500%.

(Related: Experience Justifies a 1331% Increase in an LTCI Block’s Rates: Actuaries)

Many of these insurers have closed blocks of business, meaning that they are no longer taking new LTCI customers.

Regulators in some states have contended that many of the large increase requests were unreasonable, or were not justified by the issuer’s experience in the regulator’s own state.

The rate review harmonization committee would try to establish uniform standards for handling increase requests.

Currently, the NAIC has a Long-Term Care Insurance Task Force at the executive level, led by state commissioners. The NAIC also deals with LTCI issues, such as reserve adequacy and pricing, at panels that are part of its health insurance and financial condition committees.

The NAIC is not commenting on the new group, but it is expected to discuss the new committee in Orlando next month, at its annual spring national meeting.

Genworth has openly spoken of the need for rate increases in its LTCI rate action plan. It stated as part of its fourth-quarter 2018 results that it “continues to work closely with state regulators to demonstrate the broad-based need for actuarially justified rate increases in order to pay future claims.”

The financial filing stated Genworth received approvals for nearly $400 million of incremental annual premium increases during 2018, a 100% increase over 2017.

When asked about the formation of a new rate committee, Genworth spokeswoman Julie Westermann said the company would be supportive of it.

“It’s very important that the NAIC and all states adopt a common standard to approve actuarially justified LTC premium increases,” she told ThinkAdvisor in an email message. “There is too much variation in what individual sates approve, which leads to inconsistency and the potential for certain states’ policyholders cross-subsidizing policyholders in other states.”

Westermann did add that widespread adoption of such standards is needed for this initiative to succeed.

Genworth’s acquisition by China Oceanwide is still pending, with the transaction having been extended again until April 30, the company announced Thursday.

— Check out Trade Groups Urge Maryland Lawmakers to Wait for SEC Reg BI on ThinkAdvisor.


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