Maryland Law May Prohibit John Hancock Increase

[somarco]

Pretty close.

New premium is the life blood of insurance, regardless of the line of coverage, but more so with life & health.

New premium is underwritten and assessed from a risk perspective. That underwriting is "good" for about 3 years, after that it ages and becomes almost insignificant. The longer the risk stays on the books the greater the chance of a large claim.

Once the block is frozen (no new policyholders) the block immediately starts to deteriorate. As premiums rise to compensate for claims, healthy people leave and the sick ones stay behind.

This puts pressure on the block for more and higher premium increases. As premiums rise, more people drop out. Some because they found a less expensive option, others because they could no longer afford the premium.

This creates more pressure on the block which requires even heftier premium increases.

The result is what is termed a death spiral. The block continues to get worse until it dissipates from rate increases or another carrier buys the block.

Care to tackle IBNR and lag reports?

Even if you are inclined, I would rather call on Dull again since he seems so informed on risk management and actuarial practices.

 

[GreenSky]

Bob,

So you're saying that it is possible that a LTC carrier might have to raise premiums?

Rick

 

[somarco]

Rick, it is too bad you did not become insurance commissioner. Had you done so, your next step as head of HHS would have been inevitable.

And yes, it is possible an LTC carrier will have to raise premiums, even if they are writing new business. But if they don't write enough (or any) new business, the pressure on premiums can be significant.

 

[Mr_Ed]

Pretty close.

New premium is the life blood of insurance, regardless of the line of coverage, but more so with life & health.

New premium is underwritten and assessed from a risk perspective. That underwriting is "good" for about 3 years, after that it ages and becomes almost insignificant. The longer the risk stays on the books the greater the chance of a large claim.

Once the block is frozen (no new policyholders) the block immediately starts to deteriorate. As premiums rise to compensate for claims, healthy people leave and the sick ones stay behind.

This puts pressure on the block for more and higher premium increases. As premiums rise, more people drop out. Some because they found a less expensive option, others because they could no longer afford the premium.

This creates more pressure on the block which requires even heftier premium increases.

The result is what is termed a death spiral. The block continues to get worse until it dissipates from rate increases or another carrier buys the block.

Care to tackle IBNR and lag reports?

Even if you are inclined, I would rather call on Dull again since he seems so informed on risk management and actuarial practices.

Like I said last night, you guys needs to stick to medical insurance.

There are LTCI blocks that have been "frozen" (using your words) for 20 years and have not had a rate increase and have had a near zero lapse rate. So, why haven't those blocks deteriorated and gone into a death spiral?

There are LTCi blocks that have been "frozen" for 10 years, have had a 25% rate increase and still have a very low lapse rate. Why haven't these blocks deteriorated into a death spiral?

There are LTCi blocks that were "frozen" for about 10 years, had a 45% rate increase, and, today, 7 years later, the blocks still are showing no signs of a death spiral.


LTCi is a lot different than medical insurance.

IBNR is critical to medical insurance, but it is essentially irrelevant to LTC insurance.

The biggest flaw in your argument is that you think that, like medical insurance, after getting a premium increase healthy policyholders will drop their LTCi and get a different policy (which of course, would result in a death spiral.) Very few people replace their LTCi policies after a rate increase. They typically pay the higher premium OR reduce their benefits and keep the premium the same.

 

[somarco]

LTCi is long tail business so IBNR is calculated differently from medical, but it is critical to pricing a block. There is a reason why LTCi blocks have been consolidating and some have received significant increases.

Granted, not all blocks have been given increases just like all smokers don't end up dying of lung cancer. Doesn't mean they are not going to increase in the future.

And BTW, LTCi is health insurance as is DI, BOE and other similar lines. All have different factors to consider but especially IBNR. Medical insurance and STD is short tail business while DI and LTCi are long tail and loss ratio's are calculated in very different ways from short tail business.

I see no reason to continue singing lessons.

 

[Mr_Ed]

LTCi is long tail business so IBNR is calculated differently from medical, but it is critical to pricing a block. There is a reason why LTCi blocks have been consolidating and some have received significant increases.

Granted, not all blocks have been given increases just like all smokers don't end up dying of lung cancer. Doesn't mean they are not going to increase in the future.

And BTW, LTCi is health insurance as is DI, BOE and other similar lines. All have different factors to consider but especially IBNR. Medical insurance and STD is short tail business while DI and LTCi are long tail and loss ratio's are calculated in very different ways from short tail business.

I see no reason to continue singing lessons.

I'm still waiting for examples of all the death spirals.
(The only one is Penn Treaty--and anybody with a brain saw that one coming ten years ago.)


Somebody on this forum wrote:

"Maybe what we're going to end up with is that LTC is a failed insurance concept. Clients likely can't afford that rates LTC carriers actually have to charge to remain afloat."



Failed insurance concept? Gimmeabreak. Here are some facts:

• 36 years of LTCi policies in-force.
• Nearly 10 million people insured by LTC insurance.
• Over $60 BILLION in incurred claims.

Does that sound like a "failed insurance concept"?

With all that premium and with all those lives insured, I'm sure someone on this forum could find at least a dozen "death spirals" somewhere.


Most LTC insurance policies have never had any premium increase.
Most policies that have had increases have increased by 25% or less.

But, even if every LTC insurance policy had a 100% premium increase over the lifetime of the policy, that averages out to less than a 3% compounded increase per year.

I'd love it if my medical insurance premiums went up only 3% per year. I'd love it if they went up only 10% per year.


Nobody wants to think about planning for long-term care... not even insurance agents.

 

[Crabcake Johnny]

We see:

A: More carriers getting into the LTC business
B: More carriers exiting the LTC business

Replies welcome

 

[Mr_Ed]

We see:

A: More carriers getting into the LTC business
B: More carriers exiting the LTC business

Replies welcome

This is actually a pretty strong argument.

After all, look at what happened to the personal computer industry after IBM stopped selling computers in 2004.

When the company that set the standard for personal computers (remember “IBM-compatible”), stopped selling personal computers, the entire industry fell apart.

Hardly anyone has bought a personal computer since then.




(WEB-OVER-THE-TOP-SARCASM was used in this post.)

 

[Crabcake Johnny]

My point is lately in this wondrous world that is LTC I can't seem to go a week without hearing of a carrier exiting the market or a carrier jacking the living cr*p out of the rates.

I guess I'll see you in 5 to 10 years when this market is all but dead.

 

[Mr_Ed]

My point is lately in this wondrous world that is LTC I can't seem to go a week without hearing of a carrier exiting the market or a carrier jacking the living cr*p out of the rates.

I guess I'll see you in 5 to 10 years when this market is all but dead.

Lord knows everything in the press is fair, balanced and 100% accurate.

Thank you for providing such a reasonable argument. Your logic is irrefutable.

Since you'd asked everyone to participate in your poll, maybe you should answer it yourself. How many of the leading LTC insurers have left the market in the past 10 years? You might want to add a 2nd question to that poll: How many of the leading LTC insurers have entered the market in the past 10 years?

PS I'll be retired in 5 years, living off a portion of my renewals. But I'll be happy to reply to this post then.