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New Research Warns Consumers On Long-term Care Insurance Policies

A new survey of long-term care insurer rate increases offers a rare glimpse into an insurance sector with a history of problems for consumers.
Long-term care insurance (LTCI) is a relatively new type of insurance. For most of its 50-year history, insurers made overly optimistic assumptions about key factors in the price of their policies, including:

  • how much to charge for policies
  • how many policyholders would keep their policies in force
  • how long policyholders would live
  • how many policyholders would need long-term care during their lives and for how long
  • the yield insurers would earn on their investments
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Because the insurers’ assumptions turned out to be wrong so often, they have gone to state insurance regulators to request approval for price increases, as allowed by the policy contracts. Milliman, a national actuarial firm, recently released the results from a voluntary survey of 20 insurance companies that have asked for a rate increase. A few highlights:

  • Most rate hike requests received full or partial approval.
  • The average approved increase was 29%, with a range from 5% to more than 60%.
  • Companies that request a rate increase also provide reduced benefit options, including reduced daily benefits, reduced benefit periods, increased elimination periods, and reduced inflation protection. Only about 11% of policyholders elected a reduced benefit option.
  • Many companies also offer a reduced paid-up benefit, with no further premiums due, but fewer than 5% of policyholders elected this option.
  • Cash buyouts are under discussion but are not yet common.
  • The review process and the results vary by state. A National Association of Insurance Commissioners task force is developing a multi-state process to encourage uniformity and efficiency.
The March 2022 survey of long-term care insurer rate increases confirms that LTCI is fraught with risks to policyholders. Whether you have a received a policy rate increase notice or are considering buying a new policy, we recommend consulting with a professional who understands the risks.

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.


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This article was written by a professional financial journalist for Vantage Point Financial Services, LLC and is not intended as legal or investment advice.

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