LTC development in Asian market
The aging population in Asia, driven by lower fertility rates and longer life expectancies, has contributed to growing needs for long-term care (LTC) in the region. Several Asian countries are developing programs to fulfill LTC needs, including Singapore, Japan, South Korea, and Israel, which all have public LTC programs as well as private LTC insurance to supplement the public programs. We discuss two of the four below:
- Singapore launched the enhanced public LTC program CareShield Life in October 2020, following the earlier program ElderShield in 2002, to provide more affordable premiums and better benefit coverage. When we designed CareShield Life as consultants to the Ministry of Health, Singapore, some actuarial considerations included the breadth and depth of benefit coverage, a modeling approach, and a fund solvency monitoring framework. The private LTC insurance market in Singapore provides supplemental coverage on top of the public programs, which is still a very small market compared to total LTC expenditures.
- Japan’s public LTC insurance system has been available since April 2000 to support LTC needs for society as a whole. However, according to a survey in 2007, most Japanese people feel that preparedness for LTC, including public LTC insurance, is insufficient. Nevertheless, sales of private LTC have not been performing adequately so far to meet the long-term need that is anticipated.
Milliman LARA™ case study
LTC wellness initiatives have increased in popularity recently as insurers look for additional ways to manage the costs of LTC while also supporting policyholders. Milliman LTC Advanced Risk Analytics™ (Milliman LARA™) is a proprietary suite of predictive modeling solutions that focuses on early identification of potential LTC claimants to prioritize them for interventions aimed at preventing claims, delaying the need to utilize formal LTC services, and/or reducing the severity of services needed. Utilizing proprietary personalized variables derived from third-party data sources, along with medical and prescription drug data from Milliman IntelliScript®, Milliman LARA can provide intelligence to insurers in order to stratify the population and implement wellness initiatives as part of a sustainable program.
Milliman recently published a simulated pilot analysis that illustrates how a focused wellness program can generate positive return on investment (ROI). The Milliman LARA models identified 45% more near-term future LTC claimants under age 90 than traditional actuarial models. Prioritizing LTC policyholders who have the highest risk of near-term claims for wellness interventions benefits them directly and provides insurers with a path to positive ROI on the wellness programs.
Figure 3 from our pilot analysis (shown below) illustrates the percentage of claims correctly identified (i.e., the true positive rate) for insureds under age 90 by the traditional actuarial (baseline carrier data-only) models and by the Milliman LARA models for varying percentages of the total population. When 6.5% of the total population is prioritized for intervention, the Milliman LARA models utilizing proprietary third-party data identify 54% of claimants under the age of 90, compared to only 37% when the traditional actuarial models are used. This results in nearly 150 additional net claims under age 90 correctly identified by the Milliman LARA models.
Figure: True positive rate by prioritized population percentage with breakout of net additional claims identified by LARA models at 6.5% prioritized population
Long-term care IT solutions
Currently there are increased internal and external regulatory and accounting needs for more accurate, efficient, controlled, and audited data. This may be to ensure internal management information needs are met, or external disclosure requirements are met. As a result, actuarial data management solutions are becoming increasingly critical in meeting broader business needs.
LTC, in particular, often requires significant and advanced modeling efforts to better understand, evaluate, and manage the business. These management needs are highly dependent on actuarial models and present significant operational risk from the generation of data inputs driving these actuarial models. As a result, actuarial functions have slowly built their own data processes on top of legacy IT solutions, attempting to apply band-aid solutions to mitigate data operational risks. As a byproduct, actuaries have developed strong data management skills in new ways.
Independent of this, major advances in data technology have been observed. In particular, the emergence of modern data tools, such as Azure Data Factory, has reduced the learning curve in building data solutions and allowed more functions beyond IT in designing, building, and owning them.
As a result, many actuarial teams today are reimagining actuarial data management. For example, many actuarial teams are exploring options for expanding the traditional idea of an actuarial modeling system from the core calculation engine in the middle to now include the data management processes on the left-hand side, the data management processes on the right-hand side, and the analytics on both sides! When we expand the actuarial modeling value chain to also encompass actuarial data management, we start to realize:
- Efficiencies in developing and executing modeling processes
- Faster and deeper ad hoc and what-if analyses
- Stronger controls and governance across the entire modeling value chain
- Increased auditability
Milliman’s Integrate® team has been on this journey for 10 years as we’ve worked with clients to understand and implement actuarial data management solutions that help them achieve their desired business outcomes; whether it’s model input data generation, deeper and faster analytics to support product management needs, daily solvency monitoring, or simply streamlined actuarial operations—and we’ve built these solutions in a way that fully integrates with the MG-ALFA® models in the middle.
2021 Long-Term Care Insurance Basecamp
Milliman consultants had the opportunity to participate in Faegre Drinker Biddle & Reath LLP’s 2021 Long-Term Care Insurance Basecamp. We enjoyed getting together with the industry in person, listening to experts, and discussing the following topics:
- LTC Ex Task Force: Where Are We Now and Where Are We Heading
- How Will Wellness Initiatives Change the Face of LTC and LTCI?
- Litigation, Claims, and Anti-Fraud: Trends in Long-Term Care Insurance
We wanted to thank Faegre Drinker for hosting and putting on a great panel of speakers. We look forward to continuing the discussion.
Upcoming studies
SOA COVID-19 Survey
The Society of Actuaries (SOA) Research Institute retained Milliman to conduct a survey on the impact of COVID-19 on LTC insurance mortality, voluntary lapse, and morbidity experience. The results of the survey, which was conducted from August 2021 through September 2021, are presented in this report: https://www.soa.org/globalassets/assets/files/resources/research-report/2021/covid-19-impact-ltc.pdf.
Rate increase survey webinar
As a follow-up to a survey conducted in 2016, Milliman conducted an LTC rate increase survey over the past year. The report was made available to 20 participating carriers this September and will be made public on the Milliman website in early 2022. A webinar highlighting some of the results from the survey was hosted in November and is available on the Milliman website. See https://www.milliman.com/en/video/Milliman-LTC-Rate-Increase-Survey-Webinar-An-industry-survey-of-strategies.Valuation survey
As a follow-up to prior surveys (most recently conducted in 2018), Milliman has solicited input for an LTC valuation survey. New this year are questions on Actuarial Guideline 51 (AG51) and long-duration targeted improvements. The report was made available to 20 participating carriers this November. The survey results will be made public on the Milliman website in early 2022.
Industry news
Actuarial equivalence issue brief
A working group of the American Academy of Actuaries (AAA) has drafted an issue brief discussing the issue of actuarial equivalence in the context of LTC insurance rate increases. This issue brief discusses different approaches that companies may take to create new reduced benefit options, and various considerations from company, consumer, and regulatory perspectives. The working group was comprised of Milliman consultants as well as representatives from major LTC insurance (LTCI) carriers and regulators. The issue brief should be issued in the first quarter (Q1) of 2022.
Combo product practice note
A working group of the AAA completed a draft of a practice note to discuss the issues surrounding the valuation of combination (or "hybrid") life and LTC products. In particular the practice note addresses considerations that actuaries have when reserving for these products under VM-20. The practice note discusses assumption setting, margins for adverse deviation, reinsurance, calculating claim reserves, and how these factors are influenced by the benefit and rate structure of hybrid life and LTC policies. The practice note should be issue in Q1 2022.
MSA review
On December 12, 2021, the National Association of Insurance Commissioners (NAIC) workgroups adopted the framework for the Long-Term Care Insurance Multi-State Rate Review. The adopted framework can be found here.
Milliman publications and news
Setting the stage: A journey on public LTC program design (milliman.com)
This brief is the first in a series of articles exploring actuarial considerations related to public LTC programs using a social insurance framework.
Living benefit riders to life insurance policies: Pricing considerations and strategy (milliman.com)
In this article, key product development and pricing considerations are discussed as well as the advantages of offering many living benefit riders on a single life insurance policy and considerations when filing these products for review and approval for entering the market.
COVID-19 impact on long-term care insurance report: 2021 survey (milliman.com)
The Society of Actuaries Research Institute retained Milliman, Inc. to conduct a survey on the impact of COVID-19 on long-term care insurance mortality, voluntary lapse, and morbidity experience. The results of this survey, which was conducted from August 2021 through September 2021, are presented in this report.
Economic and external factors that influence long-term care claims (LTCI) summit
A summary by Robert Eaton about the fourth Long-Term Care (LTC) Medical Symposium on December 2, 2021.
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