Some Doubt LTC Insurance Industry’s Future as Premiums Spiral Upward

Genworth, which has the nation’s most long-term care (LTC) insurance policyholders, has almost regularly increased their premiums over the past couple years, and this year has approved a quarterly weighted average rate increase of 58% for some in 22 states. Other provided have applied for similar increases.

An explanation for the LTC market suffering from such high premium increases starts right from the beginning of the industry. When these products were developed, there was not a lot of statistics available to properly determine future claims utilization,” explains Murray Gordon, CEO and founder of  MAGA Limited, an LTC insurance planning specialist and consulting firm. From the start the products were under-priced, so with rising costs in the medical industry the cost of LTC policies have to play catch-up.

But there are other factors affecting costs of the policies. Customers are living longer and filing more costly claims than originally expected, especially as health-care costs rise, and low-interest rates have adversely impacted carriers’ earnings on reserves.

In 2017, the number of traditional LTC policies sold amounted to just 10 percent of those 20 years earlier, with several insurance companies deciding to sell new LTC policies altogether.

See Ben Mattlin, Some Doubt LTC Insurance Industry’s Future as Premiums Spiral Upward, Financial Advisor, August 23, 2018.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.