Regardless of the type of insurance being discussed, insurance underwriting is essentially about assuming risk.
For life insurance, the risk is death and there is a great deal of actuarial data to make accurate predictions.
For long-term care insurance (LTCi), the risk is different, and, for this assessment, there is less actuarial data because of the number of variables.
In laymen's terms, we could say that mortality is how likely you are to die, and morbidity is how likely you are to have a significant impairment and live.
Now before we try and wrap our arms around some of the new LTCi underwriting standards, let's take a step back to discuss what items had a direct impact on insurers' ultimate decision to tighten up their underwriting on new applicants. Here are the top three in my opinion:
1. Gender pricing was introduced in 2013, with the LTCi industry mimicking the life insurance industry by using a gender rate pricing structure on its products.
Today, most of the top carriers have either released products with gender rates or have filed such products, with the products still awaiting approval from state departments of insurance and from the Interstate Compact reviewers.
The blood and urine testing requirement appears to be a direct result of the new shift to gender pricing, as it was released simultaneously.
Insurers instituted the new gender pricing strategy along with underwriting practice to help reduce risk and improve the sustainability of their LTCi products.
2. In 2013, LTCi claims increased 13 percent, to $7.5 billion. Insurers began asking themselves, "Are we asking for enough data on new applicants?" and "Why is the average claiming age decreasing?"
3. Carriers began reviewing high-risk conditions and conducting more comprehensive underwriting internal "deep-dives."
Insurers are also being more strict about the family profile history (one insurer may include genetic testing of applicants with a family history of genetic disorders); medical records for applicants of all ages; and face-to-face interviews for younger clients.
