GE expects $1.7 billion in rate increases for long-term care policies

The announcement comes a year after GE said it would need to inject roughly $15 billion to shore up its long-term care reserves

Mar 7, 2019 @ 2:37 pm

By Greg Iacurci

General Electric expects to institute $1.7 billion in premium increases for its long-term care insurance policyholders over the next several years, the company said Thursday, making it the latest of several insurers to raise premiums for customers as they contend with market forces making the insurance costlier for them to underwrite.

GE will institute the premium increases through 2029. It has 274,000 in-force long-term care policies on its books, all more than a decade old.

State regulators have already approved $500 million of the increases, which haven't yet been implemented. The remaining $1.2 billion have been filed with regulators or are expected to be filed in the future, GE disclosed in an investor presentation.

The disclosure follows GE's announcement last year that it would need to inject $15 billion into reserves over a seven-year period to shore up its long-term care business, a revelation that sparked an investigation by the Securities and Exchange Commission. (The company has since revised that figure to $14.5 billion.) At the time, GE also disclosed a separate $6.2 billion after-tax charge against earnings related to long-term care insurance.

GE holds a substantial legacy LTC business through a subsidiary, North American Life and Health Insurance, which covers costs related to nursing-home stays, assisted living and home health care via reinsurance transactions with other insurers. GE stopped underwriting LTC policies in 2008.

The company acquired these reinsurance obligations after spinning off Genworth Financial Inc. in 2004 and selling Employers Reinsurance Corp. to Swiss Re in 2006. In these transactions, GE retained the LTC liabilities of Union Fidelity Life Insurance Co. and Employers Reassurance Corp.

GE has $20 billion in reserves to cover future long-term care claims for the more than 340,000 people covered by its insurance policies.

GE and other insurers say premium increases are justified given a number of economic challenges, such as a prolonged period of low interest rates, longer lifespans and increased health-care costs. Many insurers also made some faulty actuarial assumptions, such as overestimating the number of policyholders who would lapse their policies over time, according to experts.

GE has a high proportion — 76% — of policyholders on its books who are still making premium payments. Its average policyholder is 77 years old.

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