Dear Genworth clients,
I appreciate the frustration, anger, and even fear associated with the multiple letters you have received regarding lawsuits and rate increases. I wanted to explain this situation and provide you with updates and information to help you make informed decisions going forward.
Rate increases affected the entire traditional long term care insurance marketplace.
There were over 100 companies that sold traditional LTC insurance policies in the late 1990’s and early 2000’s. At the present time, there are only six companies that sell these individual traditional long term care insurance policies. Almost every company that sold LTC insurance in the 1980’s and 1990’s, raised rates on their existing policy holders. This was due to the insurance company actuaries making incorrect assumptions that included, but were not limited to: the percentage of policy holders who would enter into claim, the duration of their claims, the interest rate environment, the lapse rate, etc.
The present problem:
To fund future claims, Genworth’s LTC insurance book of business must sustain itself
between its reserves and ongoing premiums.
Policy holders will receive two types of letters:
The first letter is a Settlement letter, A Settlement letter provides extremely specific options that are only available for a specific period of time. If you call Genworth customer service for alternative options outside of the Settlement options, make sure that you make this clear to the representative. You can always reduce your daily/monthly benefit, your benefit period, and oftentimes adjust your inflation protection.
The second letter is a rate increase letter. This letter will generally include coverage options for you to select from.. You can always call customer service to explore other options that are not covered by the letter which include:
Reduce or eliminate the inflation protection (the daily/monthly limit will remain unchanged.)
Reduce the daily or monthly benefit.
Reduce the benefit duration.
Lengthen the elimination period.
The rate increase letters will include Genworth’s plans for current rate increase requests. The rate increase plans will vary from policy holder to policy holder depending upon policy design. Generally, policies with 5% compounding and unlimited benefits will have the highest estimated future rate increases. Each state’s insurance department has tried to strike a balance between the needs of the insurance companies and the needs of its policyholders. Genworth’s rate increase requests will continue. They will continue to ask for what is actuarially justified and it will be up to each state’s insurance department to decide what will be allowed. Rate actions specifically in MA have often been significantly less than in other states.
What is the impact of these rate increases and Settlement letters on policy holder decisions?
From 2012 until March of 2023:
50.1% of policy holders retained the full value of their policies.
28.2% of policy holders reduced their benefits.
20.6% of policy holders took non-forfeiture, which is a reduced paid up policy.
What to do – How does one plan?
First, reevaluate the value of your policy in lieu of an increase in premium.
Retain your policy: If you can afford the premium, I recommend that policy holders continue to pay the rate increases. The cost for long term care is exceptionally high in the northeast, and it is unlikely that there will be excess in the benefit when care is needed. For example, home care on average is $37/hour with a 4-hour minimal shift which is $4,400/month for a single shift of care. AM and PM care is $8,800/month and a 15-minute need in the middle of the night is a full 8-hour shift, which is another $8,800/month. The higher quality assisted living facilities are $7,500/month to start, and can range up to $14,000/month for memory care.
Reduce your policy: If you are going to reduce your policy, it is important to understand that the risk to the insurance company primarily rests in the 5% compounding. Reducing this factor will be the best choice for being on the lower end of future rate increases. This could come into play if you have moved to a lower cost of care state and find that you are overfunded with your present policy’s benefits.
Understanding the future of rate increases
Genworth is working hard to provide full transparency so that policy holders can plan for future rate increases. The earlier a state implements the requested rate increases, and the larger the rate increases that are approved, the less risk there will be to policy holders for overall future rate increases.
Register on Genworth.com: From the home page, navigate to the coverage and care tab. Here you can find current future rate increase plans, needs estimator. (remember this is a median rate and in MA the assisted living settings are much higher). Here you can view if there are upcoming rate increases based on your policy’s state of issue, the policy name, and your policy design. You can also view how the structure of policy design will impact future rate increase requests. (See video above)
Good news – looking at the glass half full.
While these are challenging financial times, Genworth continues to pay their claims and continues to pay them well. Most of the Genworth policies that were sold, even with the rate increases, are gold mines of benefits. Genworth policy holders are paying a very reasonable price in comparison to the pricing of today’s policies.
Pat yourself on the back that you did a good job when you
purchased your Genworth policy!