Genworth move could signal big shift in distribution of long-term-care insurance

Insurers may turn to direct-to-consumer sales only, bypassing brokers and insurance agents.


Genworth Financial Inc.’s recent decision to halt sales of individual long-term-care insurance policies through brokers and agents and just go directly to consumers could represent an emerging trend among insurers.

Genworth, the largest long-term-care insurer by number of policyholders, temporarily suspended sales of traditional, individual policies on March 11, citing falling sales through brokerage general agencies. Genworth also suspended sales of an immediate annuity that’s medically underwritten and could be used to help cover long-term-care costs such as nursing home visits.

The only remaining outlet for individuals to buy coverage is the firm’s internal Telesales group, which sells directly to consumers, or through group plans in the workplace, according to spokeswoman Julie Westermann.

(More: GE expects $1.7 billion in rate increases for long-term-care policies)

Jesse Slome, executive director of the American Association for Long-Term Care Insurance, expects other insurers to do the same in order to mitigate “enormous” distribution expenses, which become untenable amid declining industry-wide sales.

“The direct-to-consumer trend is nothing new for many businesses,” Mr. Slome said. “I look and say Genworth may be forging a new trail for the long-term-care industry.”

Sales of traditional LTC policies have fallen more than tenfold since their peak in the early 2000s, when consumers were buying about 700,000 individual policies, according to AALTCI.

(More: Genworth diverts $327 million to shore up long-term-care insurance)

Only about a half-dozen insurers remain in the market for traditional LTC insurance, Mr. Slome said, including Massachusetts Mutual Life Insurance Co., Mutual of Omaha, New York Life and Northwestern Mutual.

The largest long-term-care insurers have stopped writing new business entirely, including Continental Casualty Co., a subsidiary of CNA Financial Corp.; John Hancock Life Insurance Co.; MetLife; and Unum Group.

Genworth — which covers roughly 1.2 million policyholders, according to the National Association of Insurance Commissioners — is the exception, though its recent announcement represents a pullback.

“There are fewer and fewer carriers we have the ability to offer folks coverage for,” said Gregory Olsen, partner at Lenox Advisors Inc.

Numerous carriers still sell hybrid policies, which couple life insurance and LTC coverage, he said.

If more insurers turn to direct-to-consumer sales, brokers would find themselves cut out of transactions. The National Association of Independent Life Brokerage Agencies said it was “deeply concerned about [Genworth’s] course of action.”

Genworth officials said the suspension, which is indefinite, is primarily due to the company’s low credit ratings, which advisers use to assess the probability a company will be able to pay future benefits. The decision reflects both “the realities our company is facing today as well as our efforts to retool our business for the future,” said Ms. Westermann.

Some states appear poised to shake up the long-term-care market even more. Washington State lawmakers, for example, are pushing legislation that would create a universal, taxpayer-supported long-term-care plan. If states begin adopting these sorts of programs, the LTC market could morph into one selling supplemental insurance products, Mr. Slome said, similar to supplemental Medicare plans that cover additional costs beyond Medicare coverage.

“Sometimes industries need to undergo a seismic shift in order to reemerge,” Mr. Slome said. “Often that shift takes quite some time.”

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