What You Need to Know
- The effects of the COVID-19 pandemic continue to help stand-alone LTCI operating earnings.
- Genworth is starting by working to increase long-term care support services sales.
- The company would issue new, relatively low-risk LTCI products with help from a reinsurance partner.
Genworth Financial is working with a reinsurer to begin selling a new individual long-term care insurance (LTCI) policy that could reach the market as early as July 1, 2022.
Tom McInerney did not name the company that would be sharing the LTCI product risk. He described it as a “highly rated reinsurance partner.” The product would be a relatively low-risk, predictable LTCI) policy, he said.
“We are still in the early stages of engaging with rating agencies and other stakeholders” McInerney said.
Before Genworth could begin selling the new LTCI policy, it would have to get permission from state regulators to adjust the premiums every year, he added.
What Your Peers Are Reading
“We firmly believe that the ability to re-rate LTC policies annually is absolutely critical to the success of future LTC insurance products,” McInerney said.
McInerney talked about Genworth’s possible return to the LTCI market today, during a conference call the Richmond, Virginia-based company held to go over its results for the third quarter with securities analysts.
The third quarter ended Sept. 30.
Genworth last sold significant amounts of new LTCI coverage in early 2016.
Genworth was one of the pioneers in the U.S. private LTCI market, and it has paid LTCI claims for about 330,000 insureds.
LTCI issuers depend heavily on investing premium dollars in bonds to generate much of the cash used to pay benefits.
When the LTCI market came to life, many consumer advocates and regulators argued that the products should be designed in such a way that the premiums for in-force policies could not increase, because many of the policyholders would be retirees, who might be trying to get by on a fixed income. States imposed tough rate stability rules on LTCI products.
Genworth and many competitors have had trouble with creating adequate LTCI reserves because of low interest rates on bonds, problems with the policyholder behavior assumptions used to price older policies, and difficulties with getting permission from the regulators in some states to increase LTCI premiums.
Some consumer groups and regulators still question why a big, commercial company should be able to change a deal it made with customers simply because it guessed wrong about the future. McInerney has argued that it’s in the interest of states and most policyholders to allow enough premium increases to keep the LTCI issuers solvent.
McInerney has reported on Genworth’s website that he himself now shares responsibility for care for his 87-year-old mother, who has severe rheumatoid arthritis.
The need for long-term care planning is there, but issuers of stand-alone LTCI have suffered from low product penetration, and most of insurers’ current offerings involve attempts to innovate on the edges, with products that combine LTC benefits with life insurance policies or annuities, McInerney said.
“We believe the market is ripe for innovation, and that Genworth, with our 40-plus years of LTC experience and expertise is uniquely prepared to capitalize on this opportunity,” McInerney said. “As we’ve said before, we believe a successful reinvigoration of the U.S. LTC market will address both financing and services and ultimately, will help to reduce the likelihood of people needing care and/or less than the cost of care that they need.”