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LTC insurance provider raises the bar for policy rating

December 9, 2013
by Pamela Tabar, Editor-in-Chief
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Genworth Financial, the country’s largest long-term care (LTC) insurance provider, plans to implement active policy re-rating and periodic rate increases of 2 to 4 percent to adjust risk and control costs.

Genworth CEO Tom McInerey defends Genworth’s strategy of performing rate adjustments and downsizing certain coverages for new policies, saying the rate increases are a necessary part of today’s LTC insurance business. “I don’t think it’s prudent to be in this business unless you can, over time, re-rate policies to reflect the difference between how actual reality played out versus your original assumptions,” McInerey said in an article in Bloomberg Businessweek.

Unlike life insurance, which is often based on fixed-rate premiums and a one-time payout on a claim, LTC insurance has become a giant question mark of cost for LTC insurers, who have no way of knowing when—or how long—a policyholder will be using the insurance benefits.

Genworth’s rate-hike decisions and strict beneficiary rules have caused grumbling among consumers, who have been accustomed to fixed-rate policies with wide-reaching benefits for decades. But the company’s aggressive approach may keep the company in the LTC insurance business, unlike many other insurers who have chosen to leave the LTC insurance market.