Actuarial Experts Discuss Pension Fund Mismanagement Leading to Increased Insurance Premiums

Case Overview

This case involves a certified class of individuals against a pension and healthcare benefits provider as well was an actuarial firm relating to long term care insurance and wrongful premium increases in Oklahoma. Over ten years ago the defendant began marketing a specialized type of medical insurance product. They marketed them with the selling point that the rates paid by participants would never go up, which was understood to be the main benefit of these policies. The defendant invested the policies in more risky investments than they should have, investments that were not diversified. Eventually, the defendants realized that they could no longer cover these policies, so they raised rates by more than 100%. As a result of that increase in rate, a large number of fixed income individuals who owned these policies had to drop the policy or reduce their benefits.

Questions to the Actuarial expert and their responses

Please briefly describe your experience as an actuary, specifically as it relates to long term care insurance.

I am a credentialed actuary, hold the Fellow of the Society of Actuaries (FSA) designation, and I am also a Member of the American Academy of Actuaries (MAAA). For the past several years, I have been doing an increasing amount of consulting related to LTC insurance products. I am currently the consulting actuary for a mid-sized LTC insurance company. My work is focused primarily around the adequacy of their claim and policy reserves. I have also been engaged by multiple state regulators to serve as actuary on risk focused financial examinations for LTC insurance carriers and to review rate filings prepared by LTC insurance carriers. The purpose of the review is to assess whether the desired rate increases are justified. I am very familiar with the need for issuers of LTC insurance to seek large rate increases. There are a number of factors that contribute to this need of which unfavorable (less than expected) investment return is one of the factors. The scope of my rate work for state regulators is to assess the reasonability of rate increases requested by the companies. I know how to assess this need for rate increases. I previously served as an expert witness on a shareholder class action lawsuit against a LTC insurance carrier, and have also testified in a IRS lawsuit in tax court related to a health insurance matter.

Are you familiar at all with the practice outlined in this case summary? Is this standard industry practice?

I am very familiar with the need for issuers of LTC insurance to seek large rate increases. There are a number of factors that contribute to this need of which unfavorable (less than expected) investment return is one of the factors.

About the expert

This expert has 18 years of experience as a health/disability actuary with broad experience within the insurance industry and as a consultant. His experience includes assisting state regulatory authorites with financial examinations of health and long term care (LTC) insurance companies, assisting state regulatory authorities with the review of insurance rate filings submitted by LTC insurance companies, and additional actuarial responsibilities.

E-021581

Specialties:

Actuarial