In early August, Genworth Financial announced that regulators in 22 states had approved a quarterly weighted average rate increase of 58 percent for some of its long-term-care insurance policies. Unfortunately, while that sounds like a lot, such LTC price hikes have become the norm in the industry in recent years.

In fact, Genworth, which has the nation's most LTC insurance policyholders, had already raised premiums by 28 percent in each of the past two years—and other LTC insurance carriers have applied for similar increases.

While rising costs have become the norm, the fact that they continue to plague this industry raises questions of when will it end. Will LTC prices ever stabilize? And why, after all these years, can't LTC insurance get its act together?

The usual explanation given for these price jumps is that the market is still immature. In its early years, lack of adequate data about claims usage led to inaccurate actuarial assumptions. In other words, from the beginning, LTC insurance policies were underpriced.

"The actuarial assumptions missed their targets," said Murray Gordon, CEO and founder of Riverwoods, Ill.-based MAGA Ltd., an LTC insurance planning specialist and consulting firm launched back in 1975. "Why did this happen? When these products were developed, there was not a lot of statistics available to properly determine future claims utilization."

The industry has been playing catch-up ever since.

"Genworth has lost $2.9 billion cumulatively in our long-term-care insurance business on our older policies, due to higher than expected claims costs," acknowledged Genworth spokesperson Julie Westermann. "This is an issue that has affected the entire LTC insurance industry. Meanwhile, Genworth continues to lose money on these older policies each year—losses we will never recover."

But there are other factors affecting costs. Customers are living longer and filing more costly claims than originally expected, especially as health-care costs rise. Moreover, low-interest rates have adversely impacted carriers' earnings on reserves.

"Rate increases that were implemented over the last five years were necessary to pay future claim obligations," Gordon explained. "In addition, major carriers have had to infuse more reserve dollars since rate increases were not adequate."

Evidently, state regulators are sympathetic. The approvals of increases "reflect that state insurance regulators understand the need," said Westermann.

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