An LTCI Bible of a Sort

Lengthy. Covers the subject well, including solutions for the future that many of us here are not interested in because we have a “legacy” product. Many references. Scribed in 2016. Maybe not for the LTC 1.0 Beginner but you can judge for yourself.

Especially relevant to LTC 1.0 is the Section titled “Insurer In-Force Long-Term Care Insurance Management“, pp 71 – 75 (different than PDF page numbering).

Particularly relevant is Subsection titled “Corrective Actions“

  • Premium rate increases. The ability to correct reserve deficiencies completely with premium rate increases diminishes quickly in the later policy durations. This is because the amount of premium collected in later years is much less than benefit payments and there are fewer policyholders paying premium, which causes the level of rate increase needed to restore reserve adequacy to be very large.
  • Benefit reductions. An approach becoming more common in recent years among insurers is to offer policyholders the option to reduce benefits in lieu of premium rate increases (after rate increases have been approved by the regulator). As an example, a policyholder may reduce his or her daily benefit, benefit period or inflation benefit option to offset the effect of a premium rate increase.
  • Recognize losses. In many cases, premium rate increase requests and benefit reduction offers have not been sufficient to restore reserve adequacy and fund future benefits. In such cases, insurers were required to recognize reserve deficiencies and post additional reserves, typically at the expense of insurer surplus or profits from other products. If the insurer has inadequate surplus, or is a mono-line LTC insurer, options for subsidizing losses may not exist.

No further comment. You make your own call.

Author: Samuel Cuscovitch

Research scientist / strategist.

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