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Large South Carolina LTC rate increase requests prompt public hearings

The outcome of the first public hearing on an individual long-term care rate filing in South Carolina does not mean that other companies are predestined to the same fate, according to the state's regulator.

"Every filing from any company is going to be looked at individually and on its own merits," South Carolina Department of Insurance Director Ray Farmer said.

The first hearing, which took place in November 2019 after a green light from the state legislature, centered on a long-pending rate request from CNA Financial Corp.

Genworth Financial Inc. and Prudential Financial Inc. are the next two companies slated for public hearings. They will take place on Feb. 5 and 6, respectively.

CNA asked for an increase of 126.3% on its long-term care book, intending to implement the new rate over the course of two years, with a 70% increase the first year and a 33.1% increase in the second. But the company was ultimately granted an increase of 18.6%, which Farmer said was a compromise agreed to by both parties. The company also agreed to refrain from filing additional rate increases on its policy forms for two years from the date of the approval.

Dave Dillon, senior vice president and principal with Lewis & Ellis Actuaries and Consultants, was contracted out by the insurance department to review CNA's filing and help make recommendations.

"We did note that there were some assumptions that we felt could have been modified, primarily around the assumed investment rate," Dillon said in an interview, noting that a higher investment rate could have lowered the premium request.

Dillon spoke during the public hearing about his observations on CNA's request and pointed out that only a 10% increase would have been needed for South Carolina rates to meet the nationwide average. In addition, had the full request been granted, the premiums would have been double the nationwide average, he said.

CNA's rate increase applies to a block of policies that were sold between 1998 and 2003 and are held by approximately 550 South Carolina policyholders. Over a period of less than four years, the company secured four separate 20% rate increases on a set of long-term care policy forms after asking for increases of over 100%.

When choosing which filings will be subject to public hearings, the department looks at factors such as the amount of the increase requested, the number of increases granted over the past several years, and whether it is an actuarially sound request, Farmer said.

"If I don't think the amount of that increase is justified, we would have a hearing," Farmer said in an interview. "This hearing allows us to have not only input from the company or any consultant that we've asked to look at it, but certainly the policyholders."

Genworth President and CEO Thomas McInerney said his company is always supportive of public hearings because it is important for all the parties involved to hear different points of view.

Genworth has participated in public hearings in a number of different states and has often sent senior executives or even McInerney himself to give presentations or represent the company.

"It's very important for regulators to approve actuarially justified premium increases that are needed so that we can pay all claims going forward," McInerney said in an interview, adding that it is also best if the filings are approved "as timely as possible."