Quote:
Originally Posted by eweissenbach
I feared this would come twenty-five years ago when insurers first began to offer LTC insurance. The fact is a lot of companies jumped in with premiums that were competetive in order to carve out a market niche. If they priced the product conservatively they would not be competetive, and thus would lose the business to those companies pricing it optimistically) The actuarial assumptions used in the pricing models were really educated guesses. The product was new and no one really knew what the future held concerning the nursing home costs (which have inflated faster than the general COL), or the utilization patterns. In some ways LTC insurance carries what insurers call a utilization bias or anti-selection, in other words those that have the insurance are more likely to use it than the public in general (people without it might tend to try and stay on their own or use spouse, family or friends to provide care, where those with it or their family, may more quickly opt for the facility). The insurers ace in the hole was a clause in most policies allowing them to raise premiums on a "class" basis - in other words they cannot raise your premium individually, but may raise premiums for everyone who bought that series of policy.
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I think this is a good summary of the problem and for the under priced policies the price has to increase.