Executives at Genworth Financial Inc. (NYSE:GNW) said the company plans to ask for for another round of premium rate increases on in-force long-term care insurance (LTCI) polcies.
The increases would bring the average total premium increase to more than 50% on “older generation” policies over the next 5 years.
The company also is seeking increases that would increase the average premium on an early series of “new generation” policies by more than about 25% over the next 5 years.
Genworth, Richmond, Va., plans to introduce a new family of LTCI products in 2013 that will require applicants to undergo the kinds of blood tests and other laboratory tests that are now common in life insurance underwriting, Patrick Kelleher, an executive vice president at Genworth, said today during a call covering the company’s second-quarter earnings.
Genworth wants to use the lab tests to look at conditions that might affect the likelihood that an applicant will need long-term care (LTC) services, Kelleher said.
The company also wants to charge different rates for men and women, to reflect gender-related differences in use of LTC services; to eliminate lifetime benefits options; and to incorporate new assumptions about the returns on the investments backing LTC policies, Kelleher said.
Unlike many of the policies sold before 2003, the older policies in the generation of policies sold since 2003 have generally been profitable, Kelleher said.
But profits have fallen short of expectations because of lower-than-expected lapse rates, higher-than-expected claims, and low interest rates, and “we believe that early intervention on the newer block is important to managing the performance of this business,” Kelleher said.
Company executives said Genworth hopes LTCI rate increases already being implemented will add $50 million in new revenue this year and $60 million next year, and that the new rounds of rate increases will add $200 million to $300 million in annual revenue.
Kelleher noted that LTCI policy benefits and underwriting changes announced in July, such as a move to drop a coverage option providing access to an unlimited amount of LTCI benefits, should be the equivalent of increasing the cost of the products by about 20%.