Tag Archives: NAIC

New Milliman survey reveals significant repricing of long-term care hybrid products in the last 12 months

Milliman today released the results of a new survey examining changes to hybrid long-term care (LTC) plans in light of the low interest rate environment and COVID-19. The study, “LTC Hybrid Product Survey,” is based on a survey of top writers of life LTC hybrid plans. The report focuses on current topics relative to the National Association of Insurance Commissioners (NAIC) Valuation Manual, Chapter 20 (VM-20), pricing, sales, and investment returns.

Key findings of the survey include:

  • When asked about the assumed morbidity margin for a hybrid product under VM-20, 29% of participants assume a margin less than or equal to 10%, 57% assume a margin ranging from 10% to 20%, and the remaining 14% assume a margin of 20% or more.
  • The top two primary challenges in modeling LTC hybrid riders under VM-20 are integrating rider cash flows with the base contract and determining the appropriate level and direction of margins for each risk factor under VM-20.
  • Hybrid products were repriced once in the last 12 months by 44% of survey participants, repriced two times by 11% of participants, three times or more by 22% of participants, and not at all by the remaining 23% of participants.
  • The single most important factor driving repricing by survey participants is the low interest rate environment.
  • As a result of COVID-19 or other factors, the majority of survey participants have changed issue age limits on hybrid LTC plans.
  • All participants reported they are finding it difficult to meet profit goals given the low interest rate environment.

A brief summary of the survey results is available by visiting the Milliman website here.

Recouping past LTC policy losses

The National Association of Insurance Commissioners (NAIC) is continuing to ensure that past long-term care (LTC) insurance losses are not recouped through rate increases. Some regulators have asked LTC companies to justify premium rate increases in part by assuming that the proposed rate increase had been in place from the beginning. However, an NAIC task force ultimately decided that this reasoning added pricing risk by not allowing companies to seek the appropriate premiums levels needed to maintain the future financial health of LTC policies. In his article “Recouping past LTC losses,” Milliman consultant Robert Eaton provides examples illustrating how this pricing risk may influence claims losses in future years. He also offers perspective on the NAIC’s LTC Model Regulation update.