Filed Under:Health Insurance, Ltci

Why is LTCI so hard to price?

Over the long term, hedging against interest rate shifts can be difficult.
Over the long term, hedging against interest rate shifts can be difficult.

Roger Loomis and other actuaries at Actuarial Resources Corp. have come out with a Society of Actuaries (SOA) report explaining why long-term care insurance (LTCI) – and life products linked to long-term care (LTC) benefits – can be hard to price.

The actuaries talk about issues such as claims risk, lapse risk and interest rate risk.

Especially over the long-term, efforts to hedge against rate fluctuations can miss the mark, the actuaries write. They say rate uncertainty can be a serious problem for insurers pricing life-LTC combination products as well as for those pricing stand-alone LTCI products.

—Allison Bell

Actuaries explain the math – and show why interest rate risk rattles life-LTC combo pricing.

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