Long-Term Care Insurance Rate Increases in the Public Eye

This New York Times article by Tara Siegel Bernard was published last week and is required reading for advisors who work in the LTC space.


The tone is markedly different from other articles on this subject. No one takes these increases lightly, and yet they are warranted. Previous editorials miss this critical point.


Here are a few key points we'd like to make in response of this piece:


1) LTC insurance is young. It's only about 40 years old (nascent in the world of insurance) and most of these policies didn't mature until Year 30. That's why this feels very sudden.


2) Interest rates are a massive factor in this need for increases. Most people bought lifetime benefits that grow at a guaranteed rate of 5% per year. Yet most don't know that insurance carriers are regulated in a way that requires low-yield investments like treasuries and other "safe" bonds (contrast that to an individual who can net 7-10% year over year on a long-term time horizon.) This low-interest environment appears to be the new normal and a price correction for policies with 5% compound inflation is warranted.


But you knew all of that already due to our recent response to the rate increases. Please take a moment to read the NYT article below and let us know what you think.