Genworth latest to rein in LTC insurance offerings

Genworth Financial Inc. will suspend sales of lifetime benefits for its long-term-care insurance products, as well as “10-pay” versions of those offerings.

The announcement was made to producers July 1 and originally reported by the Chicago Sun-Times July 4.

Along with lifetime coverage and so-called 10-pay policies, which allow clients to pay off their LTCI premiums within 10 years, Genworth will do away with 40% spousal discounts, reducing these discounts to 20%, spokesman Tom Topinka said.

All the changes will take effect July 29.

LOW INTEREST RATES

Genworth's adjustments were made in light of historically low interest rates, which have been problematic for the life insurance industry as a whole.

Insurers invest the premiums that they receive into long-term bonds and use that return to help cover the benefits. Low rates have been hampering those returns for some time.

“Given the continued low-interest-rate environment and industry dynamics, we are leveraging our extensive experience and making changes to best position Genworth for greater stability and future growth,” said Steve Zabel, a senior vice president for LTC insurance. “These interim changes to our products are designed to help moderate business flow with the implementation of our new long-term-care insurance products next year.”

The change didn't come as much of a surprise to financial advisers. A number of insurers of late either have curbed their LTC insurance product lines or sharply raised premiums in a bid to make up for low interest rates and longer-than-expected life expectancies.

“It's not surprising. Everyone is exiting a certain part of the market,” said Gregory Olsen, a partner at Lenox Advisors Inc.

“Companies are coming to the realization that lifetime benefits aren't prudent offerings anymore. It's the greatest thing in the world for the customer but terrible for the insurer,” Mr. Olsen said.

“You have to look at long-term care with a long-term view,” said Steve Cain, a principal and national sales leader at LTCI Partners, an insurance distribution firm that works with agents and advisers. “The initial reaction from our distribution partners didn't feel great, but in the long term, it's the right thing to do to manage the company's risk.”

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