Long-term care insurance (LTCI) issuers have come in for another drubbing this week.
Of course, Genworth units may have been too optimistic when they designed and priced the products involved. But, when the Genworth units wrote the business, they were hoping reasonably good investment returns would help buffer them against product design errors.
No such thing happened. The Federal Reserve Board has pushed interest rates down and kept them down, for many years, without making much effort to see whether anyone but the U.S. Treasury, giant corporations, wealthy home buyers, hedge funds and select beneficiaries of select government-sponsored enterprise loan guaranteed programs could actually borrow money at any reasonable rate.
Old LTCI blocks look bad because they are the victims of the well-known risks inherent in developing a new health-related insurance product, and because, given the nature of the vulnerable people they serve, well-meaning consumer groups and regulators saddled the new products with a cripplingly rigid regulatory structure.