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States giving ground on LTC rates, but more pressure needed, says Genworth CEO

Although a majority of state regulators are now agreeing to "strong increases" in long-term care rates, there are a few others Genworth Financial Inc. President and CEO Thomas McInerney believes have yet to respond to insurers' needs.

In aggregate, regulators approved at least 243 LTC rate hikes during the fourth quarter of 2019, which could lead to insurers collecting an additional $119.6 million in calculated written premiums across the country. Genworth accounted for more than half of that aggregate total, according to a review of rate filings collected by S&P Global Market Intelligence.

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McInerney told S&P Global Market Intelligence that he has been working closely with the National Association of Insurance Commissioners' LTC executive task force and hopes that the group will ultimately recommend a model law that ensures all states grant what is "fully" actuarially justified and do so on a timely basis.

"There are some states that are behind, and I do think that it's important that those states catch up," he said.

Companies and regulators often have different views when it comes to determining what is actuarially justified.

In theory, a request that would generate the level of "reasonable" profits originally expected could be considered actuarially justified, according to McInerney. But this is not something that Genworth, which has taken several billion dollars in reserve charges, is trying to do, he said.

"We're already focused just on what's actuarially justified to get us to break-even at some point in the future," the Genworth CEO said. "That's less than, at least under the law, what we could apply for."

Emphasis on timely

McInerney said quick responses by regulators to rate requests are ultimately good for policyholders, by constraining the overall level of increases. There have been situations where, because states did not act on initial filings, Genworth has had to submit "significantly higher" requests, he explained.

An S&P Global Market Intelligence analysis of approved rate filings during the fourth quarter of 2019 shows that several states recently responded to rate requests that had been pending for more than a year, much longer than the six- to nine-month timeframe that McInerney said he views as timely. That included replies from Idaho, Washington and Kansas to rate-hike requests that Genworth originally submitted in 2017, according to the analysis.

In addition, Genworth, along with Prudential Financial Inc., is scheduled to take part in public hearings in South Carolina in early February regarding individual LTC rate requests that were also filed more than a year earlier. The first public hearing on an individual LTC rate filing in that state took place in November 2019, and resulted in a rate increase of 18.6% on one filing for CNA Financial Corporation, which had originally requested rates be boosted by 126.3%.

But despite some regulators' reluctance to grant increases, McInerney has noticed in the past few years that more states are granting larger premium increases and doing so faster. Some members of the NAIC task force were among those states that were "behind," he said, but are now stepping up and giving premium increases where necessary.

"If we don't continue to receive significant premium increases on a timely basis, then we will have issues paying all the claims," McInerney said.

Insolvency for an insurer would end up hurting policyholders, the Genworth CEO said, as several state guarantee funds impose caps of $300,000 on the amount of claims that can be paid out if an LTC company collapses.

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