Rethinking the Approach to Long-Term Care Insurance

Client News
March 28, 2018

Rethinking the Approach to Long-Term Care Insurance

Tom McInerney | Morning Consult

Long-term care insurance has been a valuable retirement protection tool for millions of Americans, having paid out billions of dollars to soften the blow of costly, and largely inevitable, long-term care events — typically when these Americans are beyond their income-earning years.  The unmistakable value of this insurance coverage notwithstanding, these insurance policies have also been plagued by a dated, governing regulatory regime that has resulted in billions of dollars of losses to carriers and high, double-digit premium increases for policyholders.

Genworth Financial knew there had to be a better solution, and we believe we’ve found it. We are working with a handful of state regulators with whom we hope to begin piloting — in the next few months — a promising new way to oversee long-term care insurance pricing that could make double-digit premium increases for new long-term care insurance policies a rare occurrence.

This new approach will behave similarly to homeowners, auto and health insurance, with premiums adjusted annually as claims experience and projections emerge, resulting in modest, single-digit increases or decreases, if needed. This is the polar opposite of the way long-term care insurance policies historically have been regulated, where carriers had to wait so long for actuarially justified increases that they incurred large losses and were forced to raise premiums by double, even triple digits. Although carriers are entitled to receive these actuarially justified rate increases when claims exceed the claims that were anticipated when the policies were priced, they are difficult for policyholders, carriers and state regulators to manage.

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