New Genworth Product Announced

[Mr_Ed]

I just need someone to define "moderately adverse experience".....

http://www.actuary.org/files/Long_Term_Care_Rate_Stability_Practice_Note_2012_1.pdf

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BTW, I actually can read the personal worksheet; and I do fully understand your reasoning, Scott. But every once in a while it is fun to mess with you though :-)

You got me.


At least Jack asks a good question: "what is moderately adverse experience".

Jack... I'll send you a video of some actuaries defining "moderately adverse experience".

 

[scagnt83]

Whats funny to me is that the regs are filled with clauses about exceptions for lapse rates being too high... when in fact the problem in the LTCI industry is lapse rates being way lower than originally assumed.

Long story short, all the new regs do is force the insurers to disclose more of their assumptions and reasoning to the State DOI. They do put some limitations on premium increases, they even say that the increase now must be great enough to not have any future increases.
There are safeguards within the regs. But when the assumptions were wrong and they can justify the % increase the policyholder is SOL.


On the flip side rate increases are good for the solvency of the industry. A bunch of insolvent LTCI carriers would be worse than any % of rate increase.

 

[Arthur Rudnick]

Jack,
Thanks for posting that report.

I read it, I didn't study it but here's what I came away with:

You're right, the words "moderately adverse experience" shows up 2-3 time on just about every page. I may have missed it, but nowhere in this report does it explain what a "moderately adverse experience" is. In fact, this is the only "explanation" I found relating to a "moderately adverse experience":

The model regulation does not define “moderately adverse experience,” nor is that exact phrase defined in any ASOP. The regulation puts the responsibility of determining and certifying to the adequacy of premiums under “moderately adverse experience” on the pricing actuary.

My thoughts are this:
First of all, it's pretty ironic that this Model Regulation was written by the Society of Actuaries. Wasn't it the LTCI actuaries that screwed up the business in the first place? In the first 20 years of pricing the product the actuaries got it wrong every time.

Also, mentioned even more often than “moderately adverse experience” are the words: "the actuary may wish to consider.....". This report is not a mandate on what actuaries must do. It appears to me that this is a request or suggestion on what actuaries should consider doing.

What's new in this report? It all boils down to a company's actuary substantiating the reason's why the company needs a rate increase. Isn't that what they've been doing for the past 12 years? The company requests a rate increase to their state's DOI and upon review, the DOI decides to grant the full increase, a partial increase or deny the increase altogether.

Another statement that stands out is:
Actuaries retain sole discretion, however, to determine whether and how to take into consideration the current practice offered in this practice note

So, it appears that it's the company's actuary that is required to make a determination as to whether or not a rate increase is justified.

Another point:
Nowhere in the report does it say anything about raising rates to protect an insurers Reserves, However, a number of times it's mentioned that rates may be raised to protect the insurer's profit margins, which is contrary to what rate increases on existing business are supposed to be.

And, in conclusion counselor..............
Maybe I missed it (and if I did, I'm hoping that Mr_Ed can help me find it)
I did not see anything regarding a prohibition or limit on future rate increases.
Nor a limit on the amount.

It appears to me to be business as usual and as long as a company's actuary can convince the state DOI that a rate increase is justified the DOI can grant that increase.

The LTC Model Act of 2002 (or was it 2003?) did nothing to limit the rate increases that the industry has experienced over the past 12 years, so why should we expect it to be different this time Scott?

 

[Mr_Ed]

Jack,
Thanks for posting that report.

I read it, I didn't study it but here's what I came away with:

You're right, the words "moderately adverse experience" shows up 2-3 time on just about every page. I may have missed it, but nowhere in this report does it explain what a "moderately adverse experience" is. In fact, this is the only "explanation" I found relating to a "moderately adverse experience":



My thoughts are this:
First of all, it's pretty ironic that this Model Regulation was written by the Society of Actuaries. Wasn't it the LTCI actuaries that screwed up the business in the first place? In the first 20 years of pricing the product the actuaries got it wrong every time.

Also, mentioned even more often than “moderately adverse experience” are the words: "the actuary may wish to consider.....". This report is not a mandate on what actuaries must do. It appears to me that this is a request or suggestion on what actuaries should consider doing.

What's new in this report? It all boils down to a company's actuary substantiating the reason's why the company needs a rate increase. Isn't that what they've been doing for the past 12 years? The company requests a rate increase to their state's DOI and upon review, the DOI decides to grant the full increase, a partial increase or deny the increase altogether.

Another statement that stands out is:
Actuaries retain sole discretion, however, to determine whether and how to take into consideration the current practice offered in this practice note

So, it appears that it's the company's actuary that is required to make a determination as to whether or not a rate increase is justified.

Another point:
Nowhere in the report does it say anything about raising rates to protect an insurers Reserves, However, a number of times it's mentioned that rates may be raised to protect the insurer's profit margins, which is contrary to what rate increases on existing business are supposed to be.

And, in conclusion counselor..............
Maybe I missed it (and if I did, I'm hoping that Mr_Ed can help me find it)
I did not see anything regarding a prohibition or limit on future rate increases.
Nor a limit on the amount.

It appears to me to be business as usual and as long as a company's actuary can convince the state DOI that a rate increase is justified the DOI can grant that increase.

The LTC Model Act of 2002 (or was it 2003?) did nothing to limit the rate increases that the industry has experienced over the past 12 years, so why should we expect it to be different this time Scott?

Arthur,

How many times do I have to say it?

Nearly all of the premium increases you're complaining about have been on policies that were issued BEFORE the rate stability regulations took effect.


If you read the document that Jack linked to you'd have read that there are two sets of regulations governing LTCi pricing:

Loss Ratio Regulations (the original way to price LTCi)

and

Rate Stability Regulations (the new way to price LTCi)


Nearly all of the rate increases you're complaining about are on policies that were issued under the "Loss Ratio Regulations".

The only way to know if the Rate Stability Regulations work is to look at the rate increase history of those policies that are under the Rate Stability Regulations.

The difficulty is that each state implemented those regulations at a different time. Some states implemented the Rate Stability Regulation in 2002 and 2003. Some states did not implement the Rate Stability Regulation until 2008, 2009, 2010, even 2011.

 

[ltcadviser]

All I know is this: the Connecticut insurance commissioner will define moderately adverse experience more stringently than the Pennsylvania insurance commissioner.

 

[Arthur Rudnick]

originally posted by Mr_Ed

Arthur,
How many times do I have to say it?
Nearly all of the premium increases you're complaining about have been on policies that were issued BEFORE the rate stability regulations took effect.
If you read the document that Jack linked to you'd have read that there are two sets of regulations governing LTCi pricing:
Loss Ratio Regulations (the original way to price LTCi)
and
Rate Stability Regulations (the new way to price LTCi)
Nearly all of the rate increases you're complaining about are on policies that were issued under the "Loss Ratio Regulations".
The only way to know if the Rate Stability Regulations work is to look at the rate increase history of those policies that are under the Rate Stability Regulations.
The difficulty is that each state implemented those regulations at a different time. Some states implemented the Rate Stability Regulation in 2002 and 2003. Some states did not implement the Rate Stability Regulation until 2008, 2009, 2010, even 2011.

Scott,
I hear you BUT..........
My point is this:
1) I did not see anything regarding a prohibition or limit on future rate increases. Nor a limit on the amount.
2) What's new in this report? It all boils down to a company's actuary substantiating the reason's why the company needs a rate increase. Isn't that what they've been doing for the past 12 years?
3) You state: "Some states implemented the Rate Stability Regulation in 2002 and 2003. Some states did not implement the Rate Stability Regulation until 2008, 2009, 2010, even 2011".
So what good did all of those regulations do so far? Obviously not much considering blocks as recent as 2011 have been subject to rate increases. Using history as a guide, why should 2012 regulations show any different results than past regulations?

Originally posted by LTCAdviser

All I know is this: the Connecticut insurance commissioner will define moderately adverse experience more stringently than the Pennsylvania insurance commissioner

Up until last year, NYS had the toughest DOI in the country. Very rarely did they approve of rate increases on existing policyholders and if they did, it was limited to no higher than 15% and the majority 5% - 10%

Not sure what happened but last year they approved increases of 19% to 100%.

You're right, for whatever reasons CT has played hard ball and has rejected most increase requests. Whether it's because of their definition of moderately adverse experience or other reasons I'm not sure.

Is there anyway to find out what states have signed on to the 2012 regulations? I know NY has not. I understand that only 40 states are on board.

 

[Mr_Ed]

Is there anyway to find out what states have signed on to the 2012 regulations? I know NY has not. I understand that only 40 states are on board.

Arthur,
What are you talking about?
There is no such thing as "the 2012 regulations".

There are two ways LTCi pricing is regulated:

Loss Ratio Regulations (the original way to price LTCi)

and

Rate Stability Regulations (the new way to price LTCi)



The Rate Stability Regulations are currently in about 42 states.
The first state to adopt these regulations did it in 2001.
Some states did not adopt these regulations until just a few years ago.

 

[scagnt83]

Obviously not much considering blocks as recent as 2011 have been subject to rate increases. Using history as a guide, why should 2012 regulations show any different results than past regulations?

Actually in SC Genworth just announced a 12.8% increase on policies written in 2012.

 

[Arthur Rudnick]

originally posted by Mr_Ed

Arthur,
What are you talking about?
There is no such thing as "the 2012 regulations".

Well then tell that to Jack who earlier posted a link to a report titled:
Long-Term Care Insurance Compliance with the National Association of
Insurance Commissioners Long-Term Care Insurance Model Regulation
Relating to Rate Stability

That report was dated October, 2012

Originally posted by scagnt83

Actually in SC Genworth just announced a 12.8% increase on policies written in 2012.

According to Mr_Ed, there's no way that can be unless SC was one of the 8 states that didn't sign on to sets of regulations from 2001, 2002, 2003, 2008, 2009, 2010, or 2011.

 

[Mr_Ed]

originally posted by Mr_Ed

Well then tell that to Jack who earlier posted a link to a report titled:
Long-Term Care Insurance Compliance with the National Association of
Insurance Commissioners Long-Term Care Insurance Model Regulation
Relating to Rate Stability

That report was dated October, 2012

Arthur,

The document which Jack posted was not the regulations.
The NAIC LTC Model Act regarding rate stability was first approved by the NAIC in the year 2000 and then amended in 2009.

The Rate Stability Regulations were NOT written in 2012.

What Jack posted was a document the American Academy of Actuaries wrote to help actuaries comply with the Rate Stability Regulations.

The Rate Stability Regulations, although approved by the NAIC in the year 2000, did not become effective in any state until that state approved the regulation.

The first state approved the regulation in 2001. More states approved the Rate Stability Regulations each year until now we have at least 42 states which have passed the Rate Stability Regulations.

However, the Rate Stability Regulations do NOT control the policies that were issued in that particular state before the Rate Stability Regulations took effect.

My point, for the 99th time, is that the rate increases you're complaining about are on policies that were issued before the Rate Stability Regulations took effect in that particular state. Policies that have been issued AFTER a state has enacted the Rate Stability Regulations have NOT had premium increases (with very few exceptions).