Again to my earlier point, the ratio of payouts to premiums is what matters, not the insurance company's profit. But assuming 'there's profit' is a rough way of saying 'the payout ratio is significantly less than 1' (though much or most of that is due to non-payout expenses rather than profit) I partly agree with your statement. Once everybody understands that the expected value of a LTCi policy is a negative to the tune of a significant % of the expected premiums, then the reason to buy it would be risk aversion to higher than expected LTC costs that the policy would pay. Like any (unsubsidized) insurance.delamer wrote: ↑Mon Dec 06, 2021 3:27 pmI just don’t see why averages come into play in this decision. Either you think your risk level justifies the premium or you don’t.cacophony wrote: ↑Sun Dec 05, 2021 11:09 pmThe fact that an insurance company is profitable means that on average they pay out less than you would put in through premiums. That means that mathematically speaking, it's a poor bet to make, at least if you can afford to lose.delamer wrote: ↑Sun Dec 05, 2021 10:45 pmAh. True, as long as you are one of the people who doesn’t need the care that the insurance would have paid for.
Although I’m not sure what the insurance company’s profit have to do with anything.
But first people have to understand it has significant negative expected value. Some posts don't seem to recognize that, proposing LTCi in part as a method of forced savings for LTC costs near expected. Insurance isn't the way to do that. As you imply, the reason to buy insurance is for cases far above the expected value that the person could not afford to pay. The problem with LTCi policies is that their coverage tends to be limited to cases still in the fairly fat part of the distribution of outcomes. Insurance markets seem to sometimes do this. The customers and ins co's find common ground on a tolerable premium, it seems, reducing the amount of tail risk the insurers have to bear. But efficient insurance would go the other way, raising deductibles to reduce premium to a tolerable level while actually covering tail risk all the way out. Again if it's 'extremely unlikely' (being in a nursing home for over a decade, etc) it shouldn't cost much to insure against it. But for whatever reason that's not the market and LTCi policies as they exist seem to be of value in only limited cases, definitely not including our own.