No Longer Gender Neutral
Still, why the gender differential? It, too, is an offshoot of the longer, deeper actuarial data. “Studies show that women are two to three times more likely than men to require LTC and, on average, require care for a longer period,” says Kisner at SureVest. “In the past, there was not much of a price differential, and LTC insurance was purchased almost equally by men and women. However, it was a much better deal for women. Now that the insurance companies have enough claims experience, they are adjusting the premiums to more accurately reflect their risk.”

Lest that seem unfair, consider that women typically pay less for life insurance than men because they live longer than men. “The statistics bear this out,” says Murray Gordon, CEO and founder of MAGA, an insurance broker in the Chicago suburb of Riverwoods, Ill. “In 2011, females accounted for two-thirds of new LTC claims and almost 71% of the dollars that insurers paid out. We recognized this years ago, but the industry kept going with unisex rates.”

Until now, that is. Genworth Financial, the No. 1 purveyor of LTC policies in the U.S., was the first to institute different rates for men and women, effective April 1, 2013. But other carriers plan to follow suit as soon as they gain approval from regulators. “There is a window of opportunity right now to lock in current unisex rates,” says Gordon.

Regulatory Approval
That’s because carriers can’t just raise rates arbitrarily. They have to apply to state regulators for across-the-board increases; that is, they can’t single out individual policyholders. Even once the authorities give approval, there’s a waiting period before the new rates can go into effect.

And the gender difference cannot be retroactive. “The higher rates for women just applies to new policies,” Gordon says. “The companies can’t go back and alter rates on a gender basis for existing policies.” They also can’t drop existing policyholders or reduce coverage. “Unlike other types of insurance where the company can cancel you after the premium term expires, LTC policies are guaranteed renewable for life,” Gordon adds.

That doesn’t stop companies, however, from raising rates to try to make up past shortfalls or discouraging customers from renewing.

Inflation Protection
If higher rates for women only apply to new policies, why did Walker’s female client get socked with a 76% increase? It was almost entirely due to her 5% compounded inflation rider, a popular add-on. “What they really wanted her to drop was the rider,” Walker says. “The companies are petrified over the financial implications of these riders.”

Indeed, these riders represent a major liability. “How can an insurance company increase your benefit at 5% when interest rates are at half a percent?” Slome asks.

Gordon adds that a 5% compounded growth rate could “double your benefit in 14 and a half years.” Once upon a time, it made sense for carriers to offer this cheaply. “Back in the 1980s or early-’90s, I only had to pay 15% or 20% extra to add it to my own LTC policy,” says Gordon. “Now it’s much, much higher.”

Alternatives To The 5% Rider
Smart financial advisors should point their clients to more affordable inflation-protection methods. One option is simply to reduce coverage. Many carriers are offering a 3% compounded inflation rider, which is dramatically cheaper than the 5% version. Alternatively, clients could convert from a compounded rate to a simple inflation rate, which also reduces premiums. A new choice some carriers are offering is called the “Future Purchase Option,” which allows clients to add to their coverage periodically without having to jump through underwriting hoops or undergo additional health testing. According to Slome, it can cost about two-thirds of the 5% option and half the 3% add-on.