Genworth, once the largest seller of long-term care insurance policies, has announced that it has stopped selling individual stand-alone coverage, as well as immediate annuities, through brokers and agents.
Company officials say the decision is temporary, but for now it will sell only through direct-to-consumer channels or through employers or affinity groups–currently a very small market. Independent brokers fear the move could spur a wider industry trend, as carriers look to reduce costs. The move will not affect the firm’s 1.2 million current policyholders.
Genworth’s decision is the latest blow to the deeply-troubled industry. Sales of traditional policies have declined by more than 90 percent over the past decade and fewer than a dozen carriers still are selling the product. Most are organized as mutual, policyholder-owned companies. While Genworth still is publicly-held, it agreed in 2016 to be acquired by China Oceanwide Holdings Group. However, the deal has yet to be completed.
These days, consumers mostly are buying so-called combo or hybrid policies that link long-term care coverage with annuities or life insurance. According to the American Association for Long-Term Care Insurance, about 350,000 policies were purchased last year, but fewer than 60,000 were traditional, stand-alone policies. Another analyst, LIMRA, estimated that consumers purchased about 260,000 combo policies and about 60,000 stand-alone products in 2017.
Combo products come in many varieties, usually as riders to annuities or to whole or universal life insurance. With life policies, for instance, you may use a portion of your death benefit to pay for long-term care needs. Anything left over would go to your beneficiary.
While these products may be attractive to wealthier consumers, they are complicated and may come with added fees. Middle-income households with limited assets may be able to afford only partial coverage for their long-term care needs. But consumers often are attracted to a feature not available with traditional long-term care insurance: You receive benefits even if you have no long-term care needs.
At least in theory, stand-alone policies still make sense for many middle-market buyers. But high premiums have driven most consumers out of that market, even as uncertain risk has chased away nearly all carriers.
Reserves and rate hikes
In February, Genworth took an additional $327 million fourth-quarter pre-tax charge to boost the reserves it will need to pay future LTC insurance claims. It was just the latest in billions of dollars in reserves it has added in recent years. At the same time, the carrier is continuing its efforts to convince state insurance regulators to allow it to impose annual, small premium increases on policyholders, much like health insurance, rather than less frequent but much bigger premium hikes that are the standard for long-term care policies.
Last month, GE, which still has about 274,000 legacy long-term care policies it sold before spinning off the Genworth unit in 2003, announced it would request $1.7 billion in premium increases through 2029.
Last week, I attended the industry’s annual conference in Chicago. Many programs focused on finding better ways to measure risk and others were about dementia—the single biggest uncertainty for both carriers and consumers. Roughly half of all long-term care insurance claims come from policyholders with Alzheimer’s and other dementias.
Other sessions discussed public options for long-term care coverage, such as pending legislation in Washington State to create a social insurance benefit of $36,500. Many insurance executives who had long criticized public programs such as Washington’s, now see it as an opportunity to rethink private insurance.
Company execs also were interested in the new Medicare Advantage benefits for supports and services. Last year, for the first time, Congress and the Trump Administration allowed plans to offer non-medical supplemental benefits such as personal care aides or home modifications.
While these benefits are modest and plan participation is low, this initiative could break down the long-standing barriers between medical care and social supports. And it has some long-term care insurance executives wondering: Could they create a policy that supplements limited long-term care-like benefits for the one-third of Medicare enrollees in managed care?
But much of the hallway chatter was about Genworth, and what seems to be an increasingly challenging future for traditional long-term care insurance.