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Rate hikes cause carrier to reassess business

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Another group disability insurance carrier, Genworth Financial, is reassessing its place in the market with an "intense, very broad, and deep review of all aspects of our long-term care insurance business," stated president and CEO Tom McInerney.

Sources say Genworth could withdraw from the market if the company fails to win regulatory approval for additional rate hikes which would affect about 650,000 existing policies. In addition, a Genworth spokesman said the firm will also need states to approve changes that would allow the company to sell more tightly underwritten policies which offer shorter benefit periods, lower daily benefits, and other changes.

Long term carriers in general are struggling from major downturns caused by higher-than-expected benefits and lower-than-anticipated returns on investments, which is largely due to historically low interest rates as LTC companies earn significant portions of their revenue from premium income investments in high-grade bonds.

Another hit to LTCs are low consumer demand for policies. Genworth reports it sold just $83 million in long-term policies in the first half of 2013, which is $45 million less than the $128 million in the same period last year.

In addition to Genworth's announced that it would tighten underwriting standards for new buyers, the company has begun to raise premiums for women. Beyond that, the company is also looking for smaller and more frequent rate hikes on new policies, which is a shift from what policyholders have experienced by going years without an increase.

With Genworth's announcement comes one more sign that the LTC industry is in serious trouble. Even as traditional long-term care insurance remains useful, with an increase in premiums, fewer consumers are likely to buy it.

Genworth is one of the last remaining public companies still in the stand-alone business, as others have fallen to investor demands for greater returns and lower risk. Genworth promises to report on the results of its review by the end of the year.

Legal action can be a possibility if your long term insurance carrier decides to fold up shop without providing you with any recourse. Consult with the proper long term disability attorney to see what your rights are if your insurance company seeks to no longer exist, or raise rates in order to provide care.

Source: Forbes.com, "More Bad News for Long-Term Care Insurance: A Major Carrier Reassess the Business Amidst More Rate Hikes" Howard Gleckman, Aug. 08, 2013