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