How are rate increases determined?

Insurance companies go through a process of analyzing current claims data, future claims data, interest rates, future risks and many other factors before requesting rate increases. Rate increases cannot be applied to any specific age, gender, health condition, or demographic; they are approved based on policy (product) statistics only.

Insurance companies must get approval from each state’s Department of Insurance (DOI) prior to any increase going into effect.

Carriers propose the percentage of increase they would like to implement and the state approves it ‘as is’ or requires modification.

Because of this involvement by state departments, the state where you purchased the policy determines the percent of increase that your policy could incur. Companies request rate increases for a variety of reasons. The most notable reasons are:

• the increasing cost of long term care services
• increasing claims (people using LTCI)
• a low interest rate environment
• people staying on claim for longer than expected

Rate increases are necessary to help stabilize the market. It may be tempting to cancel your policy or stop paying premiums if you receive a rate increase, but it is usually much more expensive to buy the same plan you have on the current market and at your older age.

The good news is, even if your state does approve a rate increase, you may not have to pay more to keep your policy. Some carriers allow you to lower your inflation protection, daily benefit, or benefit duration to keep your plan within your budget.