Long-Term Care Insurance Premium Hikes Ahead

Premium hikes on long-term care insurance policies are being planned by two of the industry’s largest players, but both stated their intentions to strengthen their positions and remain in the industry. 

Both John Hancock Life Insurance Co. and Genworth long-term policyholders should expect to see their premiums raised in 2014 following announcements made during third quarter earnings calls, McKnight’s reported. 

Manulife Financial Corp., John Hancock’s parent company, has seen an increase in expected claim costs for long-term care policies due to longer average lengths of care stays among policyholders, along with higher rates of incidents and lower mortality. 

To offset those rising costs, said president and CEO Donald Guloien, the company plans to file for additional premium increases averaging 25% on around half of its current policies. The insurer also strengthened its morbidity and mortality assumptions in line with emerging trends. 

The long-term care insurance industry has been battling headwinds as early as 2010 when MetLife exited the market, followed by Prudential in 2012. An October 2012 Moody’s Investors Services report calling the sector’s future “uncertain,” with big-name providers fleeing the market or limiting their policies, combined with growing demand and the complexity of the product. 

Genworth Financial (NYSE:GNW), one of the largest remaining long-term care insurers, is also pursuing rate increases between 6-13% on current policies purchased between 2003 and 2012, Tom McInerney, president and CEO of Genworth Holdings, Inc., announced during the third quarter earnings call. 

“These policies are still profitable, but there is a need for more moderate rate increases to bring them back to the original pricing assumptions and to potentially avoid the need for much larger rate increases in the future,” he said. 

For older policies written between 1974 through 2001, Genworth is gaining increase approvals representing up to $160 million of annual premium increases across 31 states en route to a targeted $200 million to $300 million when all have been approved. A large majority (83%) of stakeholders have been accepting the approved rate increases, according to McInerney, with about 12% sticking with their current premium in exchange for reduced benefits. 

In January 2013, Genworth’s stock rating was downgraded from “Neutral” to “Underperform” by Credit Suisse related to its long-term care insurance holdings. During its earnings call, Genworth addressed analyst concerns by listing what it’s been doing to strengthen its long-term care insurance book in addition to rate hikes, including tighter underwriting and selling new, more expensive policies. 

“All these actions, and our new strategic approach, put us in a position to take advantage of the opportunity in long-term care insurance,” 

 Written by Alyssa Gerace