State regulators appear to be approving more long-term care insurance rate increases than in the past, even as work continues to establish a consistent national rate review process.
According to data collected by S&P Global Market Intelligence, regulators approved at least 243 LTCi rate hikes during the fourth quarter of 2019, which could lead to insurers collecting an additional $119.6 million in calculated written premiums across the country.
Genworth Financial accounted for more than half of that aggregate total, according to S&P Global, with CEO Thomas McInerney telling the publication that long delays in some states forced the insurer to seek higher rate increases as a result.
Genworth and Prudential appeared for two rate-increase public hearings last week before the South Carolina Department of Insurance. The public hearings were the brainchild of Ray Farmer, director of the insurance department, who has said he wanted to give policyholders a chance to participate in the rate-hike process.
He lobbied for a change in state law that allowed him to hold public hearings and Gov. Henry McMaster signed the bill in March. The first public hearing under the new law was held in November with Continental Casualty. The insurer requested an 18% rate hike in mid-2019.
Rate Hike Details
Genworth is asking South Carolina regulators for six separate rate hikes covering six different blocks and ranging from 21% to 70% on a block dating to 1992. Genworth manages the largest LTCi block in the industry, the company told regulators, servicing 1.1 million policyholders and
managing 50,000 active and pending claims.
In South Carolina, Genworth has 18,000 policyholders and 1,100 claimants. Statutory after-tax losses on legacy LTCi policies have averaged $425 million annually over the last five years, excluding reserve increases. Genworth said it has lost $3.6 billion on LTCi since 2006 and "will continue to incur significant losses."
Genworth was represented at the Feb. 5 hearing by Matt Keppler, president of the company's LTCi closed block, and Lynn White, senior vice president and chief of staff.
A popular product in the 1990s, LTCi was badly underpriced. Many insurers sought, and continue to seek, significant rate hikes to stabilize their books.
Genworth provided data to show how graying baby boomers sent LTCi claims through the roof. In 2010, the insurer paid 140,000 cumulative claims. By 2019, that number swelled to 298,000.
Appearing Feb. 6, Prudential explained why it seeks rate increases of 0% to 140% on seven different blocks.
"Due to lower voluntary lapse rates and mortality it is projected that a significant number of policyholders will remain in force much longer than originally expected," a Prudential graphic explained.
Prudential is offering policyholders several different options to proceed with its LTCi policies, including cutting benefits to paying to full increases. Between 86% and 87% of customers are choosing to pay the full increases, the insurer said, with 10% to 11% reducing benefits.
In 2017, LTCi insurers paid $9.2 billion in claims. Approximately 26% of that is estimated to have resulted from injury or stroke/heart disease. Prudential is "pursuing a trial implementation program to lower the risks of these types of claims," the company said. That includes in-home visits to policyholders who are not on a claim.
The uniform rate hike proposal is relatively simple: streamline the LTCi rate review process so multiple state insurance departments are not duplicating the same work, while insurers are not answering the same questions over and over. Time and money would be saved and a uniformity would emerge over time.
NAIC developed a similar uniform process for market conduct and other financial examinations.
A second part of the task force's charge is to "identify options to provide consumers choice regarding modifications to long-term care insurance contract benefits where policies are no longer affordable due to rate increases."
The task force last met for an hour Dec. 9 at the NAIC Fall Meeting. It has no calls or meetings scheduled.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.