Oct. 26, 2021 — Long-term care insurers are filing for sometimes hefty boosts in premiums for their policyholders, according to recent rate filings now showing up on state regulatory systems. These rate hike requests come as companies and regulators continue their attempts right-size the industry’s liabilities whiles the real-life costs of people living longer, with increased chronic medical conditions in a low-interest rate environment continue to trounce decades-old –or even more recent — actuarial assumptions.
Besides addressing the urgent solvency needs of many of these books of LTC legacy business, increases in rates toward more sustainable levels could nudge some LTC blocks into a more attractive space for risk transfer and private equity market, which has so far has not seen much in the way of pricing to take these blocks off the hands of insurers, according to industry analysts.
Many of the premium hikes on these policies for older Americans will be implemented over a period of a few years, if approved and many reflect a newer book of business, written in the aughts. Most companies are not longer marketing traditional LTC, as insurers try to modernize retirement offerings with hybrid annuity or life products with LTC riders.
Genworth Life Insurance Co. has asked for a premium rate increase of 62.6% for policies with lifetime benefits and 31% for policies with limited benefits on certain LTC policies in North Carolina. This request is part of its ongoing multi-year rate action plan which involves getting approval for a cumulative premium rate increase of 163% over the period of three to six years for policyholders with lifetime benefits and 95% over the period of three to six years for policyholders with limited benefits.
GLIC had already sought mid-high double-digit in previous rounds of its rate action plan, according to its senior actuary’s rate filing and public documents on its rate action plan progress in the past few years.
Genworth is also proposing options for policyholders to adjust their benefit coverage down to decrease their rate hikes. Under one new option, policyholders would have a three-year benefit period based on an industry consultant’s study that showed that average duration for an LTC event is about three years.
United of Omaha Life Insurance in Nebraska filed in Ohio this past summer, asking for a nationwide increase for certain LTC policies in the range of 6.7% to 155.4% over three years, with an overall average increase over that period of 118.8%. For example, the proposed rate increase for 2022 will range from 0.0% to 38.0%, with an average increase of 34.9%, the actuarial filing explained.
This effort is to raise premiums in the state to the nationwide level, according to the actuary’s filed memo. United of Omaha policyholders will also be offered options to reduce the impact of the proposed rate increase, including a reduction in the maximum daily benefit and a reduction in the inflation option as well as a reduction in the benefit period. The premium increase target implementation date for the first round of increases premium increase is Jan. 1, 2022, and yearly for the next two years after that.
Allianz Life Insurance Company of North America has been asking the state of Maine for rate increases of 20% to.65% for policies underwritten in the state between 2004 to 2006, noting the lifetime loss ratios without the increases will be well over 100%.For actuarial modeling purposes the requested rate increase is assumed to be effective December, 2021. The company has been going back-and-forth with regulators, according to filed memos, to provide additional rationale and data backed by actuarial analysis to justify the request, which is still pending state action, according to the SERFF database.
Bankers Life is asking the state of Rhode Island for a 40% rate increase on LTC policies “due to higher than anticipated future and lifetime loss ratios.” The company pointed to lower than expected mortality experience on these policy forms, resulting in inadequate premium rates over the lifetime of its LTC policy forms. These policies were generally sold between 2005to 2009.
CMFG Life Insurance Co. is asking Kansas and other states where its individual LTC policy was issued for a 36.8% rate increase or with an initial 11% rate increase followed by an additional 11% increase one year later and another 11% rate increase in the third year “because the current estimate of the nationwide lifetime loss ratio is in excess of expected.” It is also offering a reduction in benefits menu to policyholders.
Continental General Insurance Co. filed for a 15% increase in Texas. However, the company aid it believes that a 21% increase is actuarially justified. However, it wants to be in alignment with the insurance department’s expedited review process, according to its filing with the Texas Department of Insurance. Continental added that given that the requested rate is less than the justified rate, it does anticipate requesting future rate increases on these LTC policies which were originally sold under the name Loyal American Life Insurance Co. or United Teacher Associates Insurance Co. It is assuming a June 2022 implementation date.
The National Association of Insurance Commissioners has been trying to make rate increase approaches more consistent across states so some jurisdictions allowing for higher premiums to reflect ongoing claims costs are not subsidizing others who have granted anemic increases. This review is meant to result in actuarially appropriate increases being granted by the states in a timely fashion while getting removing cross-state rate subsidization.
While rate hikes are not popular or welcome, of course, with the public or state insurance regulators, the NAIC has noted, along with many other industry experts that “misestimation of initial pricing assumptions has made it necessary for insurers to increase LTCI rates to ensure their future solvency.”
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