Approaching LTC Rate Increases with Strategy and Compassion

Long-term care (LTC) insurance policies have undergone profound shifts since they were introduced in the 1980s and 1990s. In those days, insurers relied on actuarial assumptions about policyholder behavior, mortality, and lapse rates—many of which proved inaccurate. Inaccurate information meant policyholders retained their policies longer than expected, claims outpaced projections, and as insurers felt the financial strain, the programs became less viable. Since then, LTC rate increases have become necessary to maintain their long-term stability. 

Raising LTC rates requires a balance of financial expertise and empathy for policyholders. A successful strategy depends on data-driven decisions, regulatory knowledge, and transparent communication to ensure both industry stability and consumer trust. With approximately 13 million people in the U.S. currently requiring long-term care, and that number projected to nearly double to 27 million by 2050, a stable LTC insurance market is crucial to meeting growing demand. 

Going Beyond the Numbers for Sustainable Rate Adjustments 

Rate adjustments are about more than just balancing the books; they’re about preserving trust with policyholders and regulators. Without a thoughtful strategy, insurers invite regulatory pushback, policyholder dissatisfaction, and reputational harm. 

Strategic, compassionate rate increases require more than actuarial analysis. Insurers must proactively monitor experience, tailor rate structures, anticipate regulatory changes, and communicate transparently with policyholders. These pillars support fair, sustainable rate adjustments and long-term stability. 

The Pillars of Effective Rate Management 

From our experience, successful long-term care insurers need to implement the following key strategies to manage rate adjustments smoothly and responsibly. 

Proactive Experience Analysis 

Forward-thinking insurers take a proactive approach to experience analysis, recognizing that waiting until financial distress forces a rate filing often leads to abrupt, disruptive increases. By continuously monitoring claims trends, policyholder behavior, and benefit utilization, they implement gradual, manageable adjustments that minimize policyholder frustration and regulatory pushback. 

Tailored Rate Structure Design 

No two LTC policy blocks perform the same, making a one-size-fits-all rate increase strategy ineffective and risky. Leading insurers take a targeted approach, designing actuarially sound adjustments while offering policyholders flexible options—such as benefit reductions—to help them manage premium increases. Providing choice fosters goodwill and ensures policyholders maintain meaningful coverage.  

Regulatory Strategy and Foresight 

Strategic foresight is crucial for navigating the regulatory landscape. While the NAIC Multi-State Review process has streamlined some filings, state-by-state approvals remain complex. Insurers that invest in regulatory expertise and proactive engagement with regulators effectively expedite approvals, reduce delays, and avoid unnecessary roadblocks.  

Clear and Empathetic Policyholder Communication 

Rate increases can be unsettling for policyholders, particularly those on fixed incomes. Insurers that prioritize clear, empathetic communication—beyond just notifying policyholders of changes—build trust and improve acceptance rates. These insurers provide transparent explanations, clearly outline available options, and offer direct engagement opportunities to ease policyholder concerns. 

Seamless Implementation and Ongoing Monitoring 

Rate increases don’t end with approval—they require precise execution. Successful insurers align system updates, policyholder notifications, and customer service teams to ensure a seamless transition. These insurers conduct regular monitoring, and experience studies every two to three years allowing for proactive adjustments and reducing the risk of sudden, drastic increases.  

A Forward-Thinking Approach to LTC Insurance 

The LTC insurance market is projected to grow at a compound annual growth rate (CAGR) of 5.84% from 2023 to 2030, making balancing growth with responsible rate management more important than ever. Insurers who can successfully balance financial sustainability with consideration for policyholders will find it easier to achieve long-term stability without unnecessary disruption. 

For many companies, managing LTC blocks in-house can be a challenge, especially as regulatory complexities increase. Davies partners with insurers who prefer to outsource the management of their LTC blocks, offering the expertise and strategic support needed to navigate the complexities of rate adjustments and ensure long-term success. 

We help insurers navigate LTC rate increases with transparency, foresight, and consumer-focused solutions, building a resilient and sustainable insurance landscape. 

For more information on how Davies can support your organization’s LTC rate increase strategy, contact Raymond Nelson, Senior Vice President Actuarial Services at raymond.nelson@us.davies-group.com.