Thursday, December 4, 2008

What Options Must Insurers Give When Raising Rates

Today's consumer inquiry raises a point that will be of interest to both consumers and those marketing long-term care insurance.

Q: "If an insurer decides it needs to increase rates on an existing class of business (meaning all policies that are in that "class') must they offer consumer alternative options? Or, is this something the insurer has discretion over?"

I thank Dawn Helwig, Principal with Milliman, Inc., and a long-time supporter of the American Association for Long-Term Care Insurance for helping with the following answer.

Effective with the rate stability regulation, all policies have to give policyholders the right to reduce their premium at any time, by reducing their maximum benefit or their daily benefit. So, this isn't just tied in to a rate increase. For policies issued before rate stability, I don't think a carrier has to give that option anytime - even at rate increase time - but most do.

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