How to Evaluate the Financial Stability of a Long Term Care Insurance Carrier

When a company decides to offer group long-term care insurance as part of its employee benefits package, the conversation often centers on benefit design, enrollment strategy, and premium costs. Those are all important considerations, but there is one factor that deserves just as much attention and rarely gets it: the financial stability of the carrier behind the policy. Long-term care insurance is not a short-term product. It is a promise that could stretch decades into the future, covering employees who may not file a claim for twenty or thirty years after they first enroll. If the carrier is not built to last, that promise may be worthless exactly when it matters most.

This is not a hypothetical concern. The long-term care insurance industry has faced real financial pressure over the past two decades. Several carriers have exited the market, and others have received regulatory approval to raise premiums significantly because their original pricing assumptions did not hold up over time. Policyholders were caught off guard, and in some cases, benefits were reduced or policies lapsed when people could no longer afford the higher premiums. The lesson from this history is clear: choosing a carrier based on the lowest premium or the most attractive brochure is not enough. Financial due diligence is essential.

Whether you are an HR professional evaluating benefit options, a business owner building a competitive benefits package, or an individual trying to understand what your employer has selected on your behalf, this guide will walk you through the key methods and metrics used to evaluate the financial stability of a long-term care insurance carrier. At Combs & Company, we believe that informed decisions lead to better outcomes, and that starts with knowing exactly what to look for before signing on the dotted line.

Why Carrier Financial Strength Matters More in Long-Term Care Than in Other Lines

To understand why financial stability is such a critical factor in this particular product, it helps to understand what makes long-term care insurance structurally different from other types of coverage. With most group insurance products, the exposure period is relatively short. Medical claims are processed within the same plan year. Life insurance pays out upon a defined event. But long-term care insurance operates on a much longer timeline, and the actuarial assumptions that a carrier makes when pricing a policy in year one need to hold up for decades.

The core challenge for carriers is that long-term care is difficult to price accurately. Actuaries must estimate how long policyholders will live, how many will ultimately need care, how long that care will last, and what it will cost. Early generations of long-term care policies were priced too optimistically. Carriers underestimated how many people would keep their policies in force, overestimated investment returns in a low-interest-rate environment, and misjudged the true cost and duration of care. The result was a wave of premium increases and market exits that reshaped the industry.

This history means that when you select a long-term care insurance carrier today, you are not just evaluating a company's current financial snapshot. You are assessing its long-term capacity to fulfill obligations that may not come due for many years. A carrier that looks solid today but is undercapitalized, overly aggressive in its pricing, or operating with thin reserves may not be there when your employees actually need to file claims. That is the core reason why financial stability analysis is non-negotiable in this space.

How to Read Independent Financial Strength Ratings

The most accessible starting point for evaluating carrier stability is the independent financial strength rating system. Several major rating agencies assess insurance carriers and publish grades that reflect their ability to meet policyholder obligations. The primary agencies you should consult are A.M. Best, Moody's, Standard and Poor's, and Fitch Ratings. Each uses its own scale, but the general principle is the same: higher ratings indicate stronger financial health and a greater likelihood that the company can pay claims well into the future.

A.M. Best is the most insurance-specific of the major rating agencies and is often considered the industry standard for evaluating insurers. Their ratings range from A++ at the top down through categories that signal increasing levels of financial concern. When evaluating a long-term care insurance carrier, you generally want to see a rating of A or better from A.M. Best. A rating of B++ may still be acceptable depending on context, but anything below that warrants serious scrutiny. For a product with the longevity of long-term care coverage, sticking with carriers rated A or higher provides a meaningful margin of safety.

It is important to check ratings from more than one agency when possible, because each uses slightly different methodologies and data sources. A carrier rated highly by one agency but only moderately by another is worth investigating further. You should also pay attention to the rating outlook, which indicates whether the agency views the carrier's financial trajectory as stable, positive, or negative. A carrier with an "A" rating but a negative outlook may be heading toward a downgrade, which is a warning sign worth taking seriously.

Keep in mind that ratings are not static. They are updated periodically, and conditions in the market change. Building a habit of checking carrier ratings annually, especially during open enrollment season, helps ensure that the carrier your organization selected several years ago still meets the standards you originally required. This is particularly relevant in the fall, when many employers are actively reviewing their benefits packages and making decisions for the coming plan year.

Digging Deeper - Reserves, Surplus, and Actuarial Assumptions

Financial strength ratings are a useful starting point, but they are a summary, not a full analysis. For those who want to dig deeper, there are several more specific financial metrics that reveal a great deal about a carrier's long-term stability. The most important of these are statutory reserves, policyholder surplus, and the assumptions embedded in the carrier's actuarial models.

Statutory reserves are funds that insurance carriers are required by state regulators to set aside specifically to pay future claims. These reserves are calculated based on actuarial projections of expected claims, and they must meet minimum thresholds established by insurance regulators in each state. A carrier that consistently holds reserves well above the regulatory minimum is demonstrating a conservative approach to financial management. One that is barely meeting minimums has less of a cushion if claims come in higher than expected.

Policyholder surplus is another key indicator. This represents the difference between a carrier's total assets and its total liabilities, and it functions essentially as a financial buffer. A strong surplus means the carrier has capital available to absorb unexpected losses without jeopardizing its ability to pay claims. For long-term care insurance, where the potential for prolonged, high-cost claims is significant, a robust surplus is a reassuring sign.

Actuarial assumptions deserve particular attention in long-term care analysis. These are the underlying projections that carriers use to set premium levels, including assumptions about claim frequency, claim duration, interest rates on invested assets, and policyholder lapse rates. More conservative assumptions tend to produce higher initial premiums but also a more financially stable product over time. Aggressive assumptions may make a carrier's product look more attractively priced in the short term, but they increase the risk of future premium increases or financial distress. When possible, ask carriers or your broker to explain the actuarial basis for their pricing. A carrier that is transparent about this information generally has more confidence in its assumptions.

• Review the carrier's statutory financial statements, which are publicly filed with state insurance departments
• Look at the ratio of reserves to net premiums written as an indicator of reserve adequacy
• Compare policyholder surplus levels across competing carriers to identify outliers in either direction
• Ask directly about the carrier's history of premium rate increases on its existing long-term care blocks of business
• Inquire whether the carrier has reinsurance arrangements in place to limit its exposure on large or prolonged claims

Evaluating Carrier History, Market Commitment, and Claims Paying Track Record

Numbers on a balance sheet tell an important story, but they do not tell the whole story. A comprehensive evaluation of a long-term care insurance carrier also requires looking at qualitative factors that reflect the company's history, its commitment to this specific market, and how it actually treats policyholders when claims are filed.

Longevity in the long-term care market is itself a meaningful indicator. Carriers that have been actively writing long-term care policies for many years have lived through the industry's challenges and have demonstrated the financial resilience and institutional knowledge to survive them. Newer entrants to the market may offer attractive products, but they lack the track record that longer-tenured carriers have accumulated. When evaluating a carrier, ask how long they have been writing long-term care coverage and whether they have maintained a consistent presence in the group market specifically.

Related to this is the question of market commitment. Some insurers have pulled back from the long-term care space in recent years, placing their existing blocks of business in run-off while no longer writing new policies. A carrier in run-off is not necessarily insolvent, but its long-term trajectory is uncertain, and policyholders may face challenges over time as the company shrinks and its administrative infrastructure diminishes. You want a carrier that is actively investing in the long-term care market, not one that is quietly winding down its involvement.

Claims paying history is another dimension worth examining. The entire purpose of insurance is to pay claims, and a carrier's record of doing so fairly, promptly, and without unnecessary friction matters enormously. Resources like the National Association of Insurance Commissioners complaint database allow you to research complaint ratios for specific carriers. A carrier with a high volume of complaints relative to its size, particularly complaints related to claim denials or delays, is a warning sign regardless of its financial rating. You can also ask carriers directly for data on their average claim processing times and claim approval rates.

It is also worth reviewing whether the carrier has faced any regulatory actions, consent orders, or market conduct examinations in recent years. State insurance departments publish this information, and it can surface issues that do not show up in financial ratings. A carrier that has been subject to repeated regulatory scrutiny may have systemic operational or financial problems that have not yet fully materialized in its public ratings.

• Verify how many years the carrier has been actively writing group long-term care insurance
• Confirm the carrier is actively writing new business and is not in run-off status
• Search the NAIC complaint database for complaint ratios compared to the industry average
• Request information on the carrier's average claim adjudication timeline
• Check state insurance department records for any regulatory actions or market conduct issues
• Ask about the carrier's claim denial rate and its appeals process for disputed claims

Putting all of this together into a complete picture requires time, access to information, and some expertise in interpreting financial and regulatory data. This is one of the reasons that working with an experienced benefits consultant can be genuinely valuable. A knowledgeable advisor can gather and synthesize this information across multiple carriers, present a side-by-side comparison, and help you weigh the trade-offs in a way that aligns with your organization's priorities and risk tolerance.

Group long-term care insurance is one of the more meaningful benefits a company can offer its workforce, particularly as awareness of long-term care costs continues to grow. But the value of that benefit depends entirely on the financial strength of the carrier backing it. A policy from a financially unstable carrier is not a benefit; it is a liability waiting to surface at the worst possible time. By applying the evaluation framework outlined in this article, you can make a selection that reflects both the spirit and the substance of a truly future-focused employee benefit.

If you are in the process of evaluating group long-term care insurance options for your organization, the team at Combs & Company is available to help you navigate the carrier landscape with the thoroughness it deserves. Reach out today to start a conversation about building an employee benefits strategy that puts long-term financial strength at the center of every decision.