Genworth Reaffirms Plans for Long Term Care Insurance Unit
Genworth President Tom McIrney held a conference call on Wednesday to discuss the company’s plans for the future of their long term care insurance unit.
After McIrney joined Genworth in January, he promised an internal review of the Genworth long term care insurance unit and a summary of that review in the coming months. Investors finally received that summary last week, when they were assured by the President that Genworth will remain in the long term care insurance market for the foreseeable future.
At this point, McIrney said, the company sees long term care insurance as a “viable” business worth working on, but success cannot continue without change, he emphasized. Genworth, like the majority of LTCI carriers, have been forced to request large rate hikes for policyholders, amid an extreme low interest rate environment and increasing health care costs.
Adapting to Change
Since many companies have already left the market, speculation has been rampant regarding the possibility of Genworth leaving, too, but that isn’t the case. The importance of adaptation within the market seemed to be the theme of McIrney’s discussion with investors, and he likened the future of long term care insurance to health insurance, rather than life insurance.
As he has mentioned in previous press releases, the company plans to shift the focus on rate increases from massive, infrequent increases to more frequent but significantly smaller raises, between 2-4%, to allow customers to absorb the increases more easily and allow more room for flexibility within the company.
“It is impossible to be in this business long-term, if you have to set all of your assumptions based on the date the policy is issued and you can never change or re-rate the policies,” McInerney said. “I wouldn’t be comfortable, as the CEO of Genworth, going forward in this business if, at the end, the regulators come out in a place where they won’t allow us to get these smaller, more proactive rate increases.”
The carrier has requested increases across the country that will result in an estimated $200-$300 million in profit. So far, they have received approval for $155 million worth of increases, and they believe the rest will be granted, as well. McIrney has been talking with regulators in the midst of these requests, reminding them that if the requests are denied and Genworth is forced to leave the market, it will shrink considerably. Genworth currently holds about 35% of the entire market within the long term care insurance industry and is the largest seller of LTCI policies.
Despite the large rate increases, he said that 83% of customers have accepted the increases and kept their policy as is, while 12% kept their plan but reduced benefits, and only 5% let their policy lapse.