Summary: The model standards promulgated today by the National Association of Insurance Commissioners for long-term insurance provide greater consumer protection than existed before 1986, but two key problems remain. First, state standards have been improved, but many states have not adopted key Association standards, including those developed between 1986 and 1988. Insurers have adopted Association standards more quickly than states have but have not incorporated more recent Association standards, such as those for inflation protection, into their policies. Second, the model standards do not sufficiently address several significant areas. Terms and definitions are not uniform across policies for long-term care, making it hard or impossible to compare policies and judge which policy provisions might prevent a policyholder from receiving benefits. Pricing is not a good indicator of value--premiums for policies that offer similar benefits may vary as much as 150 percent. In addition, setting premium prices in a new market without experience data requires periodic adjustments that could make long-term care policies unaffordable for some people. By letting their policies lapse, however, policyholders almost always lose their entire investment in premiums. Further, many agents earn high first-year sales commissions, and consumers are vulnerable to agents who push unnecessary policies for the sake of getting commissions.
