Genworth Opens Door To Gender-Based LTCi Pricing
By Cyril Tuohy
InsuranceNewsNet
“April is the cruelest month,” the poet T.S. Eliot wrote in The Waste Land. It’s tax season, for one, and earnings reporting season for many public companies. And for women seeking long-term care insurance, April 2013 marks the beginning of higher premiums based on their gender.
Women live longer than men and draw on more services offered by nursing homes. As a result, women represent two-thirds of all new long-term care claims, according to the American Association for Long-Term Care Insurance.
“It’s an important change because it’s different,” said Rob Cohen, executive vice president of sales for ACSIA Long Term Care, a subsidiary of LTC Global, a distributor of senior market insurance products.
Cohen, in an interview with InsuranceNewsNet, said that about 80 percent of people buying long-term care insurance are couples and that gender-based pricing will have “a minimal effect,” on their rates. “Married couples take care of each other,” he said. “The (claims) incidence of married women is not much higher. Incidence of claims among single women is much, much higher.”
How much of a higher premium women will be charged is the question, according to long-term care insurance agents.
“Morbidity costs have been going up every 18 months,” said Jack Lenenberg, owner of LTC Partner, a long-term care agency in Alpharetta, Ga., in an interview with InsuranceNewsNet. “There are now bargains to be had in the future.”
Genworth Financial, the nation’s first underwriter to price long-term care coverage based on gender, will begin doing so this month (April). Genworth spokesman Tom Topinka said that gender-based pricing would only apply to women who apply for coverage individually, not as part of a couple. He declined to release premium dollar amounts.
A small percentage – only about 10 percent – of the total number of applications for long-term care coverage are for individual coverage, he said. With the launch of the product branded as Privileged Choice Flex 2, Genworth plans to place applicants into one of four underwriting categories: Preferred Best, Preferred, Select and Standard.
The categories don’t actually reflect an applicant’s gender, only whether the applicant is a higher or lower long-term care risk. “These changes are being made now to reflect our actual claims experience and help stabilize pricing,” Topinka said, in an e-mail to InsuranceNewsNet.
Gender-based pricing has been applied to life insurance products for decades, but such a pricing model represents a big shift for long-term care, which has been sold on a unisex basis ever since it was launched in the mid-1980s.
Colorado and Montana require unisex long-term care pricing, which means gender-based pricing can be applied in 48 states. “Once we receive approval in a state we can then move forward with product launch,” Topinka said. “In the 48 states that do not have unisex pricing, we will launch Privileged Choice Flex 2 with the gender pricing provision.”
Big players in the long-term care market include John Hancock, Mass Mutual, Mutual of Omaha and Allianz, and they likely are all keen to see how successful Genworth will be with gender-based pricing models.
Rates in the long-term care market have been moving upward for years as companies compensate for low interest rates and long-term care cost hikes, while a number of carriers have exited the long-term care market, shrinking supply.
More broadly, gender-based pricing represents another way for underwriters to cover their costs and Cohen said he suspects it’s just a matter of time before other large underwriters follow Genworth down the path of gender-based pricing.
Lenenberg said agents will have to get used to resetting client expectations now that Genworth is going from a unisex product in two categories – Preferred and Standard – to a gender-based product in four categories.
“With Genworth moving to four classes, there’s going to be more gray area, more underwriting consideration, more negotiating,” Lenenberg said.
“My advice for agents is not to let this change make you any more determined to get people to sit down and discuss long-term care planning,” Cohen said. “Not everybody needs insurance, but everyone needs to discuss long-term care planning.”
Cyril Tuohy is a writer living in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. He can be reached at [email protected].
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