MINNEAPOLIS – Insurers offering long-term care insurance are becoming more conservative in setting up reserves for those policies, perhaps anticipating that more policyholders will eventually use long-term care facilities.
A survey by Milliman, a Minneapolis-based consulting and actuarial firm, indicated companies are using more conservative approaches in setting aside reserves and are adhering more closely to statutory reserve matters.
Claims reserves for long-term care insurance can be calculated in various ways, Milliman analysts say. The 2006 survey analyzed reserves from 22 individual carriers and five group carriers. Milliman also surveyed insurers in 2003.
“Lapse assumptions that companies are using in 2006 are lower than in 2003,” said Allen J. Schmitz, a consulting actuary for Milliman who analyzed survey results. These assumptions measure the percentage of people who the companies expect to stop paying premiums. “As a result of the experiences that those companies have had on those lapse assumptions, they’ve ended up setting up a higher reserve.”