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FOR PRODUCER USE ONLY. NOT TO BE REPRODUCED OR SHOWN TO THE PUBLIC.
134617 05/05/15
Long Term Care Insurance is Underwritten by Genworth Life Insurance Company, and in New York by Genworth Life Insurance Company of New York Administrative Office: Richmond, VA
Agent and Policyholder Questions:
Our Customer Service Team is dedicated to assisting you with In-Force Rate Actions and may be reached at:
IFMP, IFA I, and IFA II 877 710.0818 8:30 a.m. – 8:00 p.m. Monday - Thursday 9:00 a.m. – 8:00 p.m. Friday
IFA III 866 751.6106
AARP® Endorsed Policies 888 274.6124
Genworth’s Commitment
The Face of Long Term Care
Our In-Force Review Process
Rate Increase History and Overview
Other Helpful Information
Help Clients Understand Their Options
Conclusion
Addendum
TABLE OF CONTENTS
PRODUCER GUIDE
Genworth In-Force Rate Action
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In fact, Genworth has provided long term care insurance for more than 40 years, protecting over 1.2 million Americans.1 Our decades of experience give us significant and unique insights into the challenges related to providing long term care services to our aging population. In fact, Genworth insures nearly 25% of all consumers who own an individual long term care insurance policy.2
Genworth’s CommitmentGenworth is committed to providing long term care insurance to help individuals and families plan for the care they may one day need.
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1 Genworth internal data, as of December 31, 2014. Represents combined data for Genworth Life Insurance Company and affiliates including Genworth Life Insurance Company of New York.
2 2013 LIMRA Individual Long Term Care Report, based on Genworth Companies’ share of in-force lives.
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As Americans live longer, millions may face the prospect of needing or providing long term care. In fact, at least 70% of people over 65 will need long term care services and support at some point.2
Unfortunately, as the number of Americans needing long term care has increased, so has the cost of the services they require. For 12 consecutive years, Genworth has surveyed long term care service providers across the country. The Genworth Cost of Care Survey is the most comprehensive of its kind, covering nearly 15,000 long term care providers across 440 regions nationwide.
The Face of Long Term Care
With the aging baby boomer population in this country totaling nearly 80 million1, long term care has become an increasingly important issue.
In reviewing the past five years of survey results, Genworth identified several emerging trends. Overall, the cost of care among facility-based providers has steadily increased. The national median daily rate for a private nursing home room is $250 in 2015. This is a 4.17% increase over 2014 and represents a five year annual growth rate of 3.95%.3
1 2014 Pew Research Center, Pew Research U.S. Population Projections: 2005-2050, February 2008.
2 2015 Medicare & You, National Medicare Handbook, Centers for Medicare and Medicaid Services, September 2014.
3 2015 Genworth Cost of Care Study
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Our actuaries lead a team to perform in-depth review of our in-force long term care insurance business. This cross-functional team identifies developments affecting our business and industry by conducting a detailed analysis of morbidity, mortality, and policy termination trends.
We evaluate our actual and projected policyholder experience and compare it to the results expected when the product was priced. These ongoing reviews influence how we manage our in-force business and how we price new products.
Our In-Force Review Process
Our Findings
We continue to see higher than expected persistency among the older blocks of our in-force long term care insurance products. While this demonstrates that policyholders value their coverage, it is one of our pricing challenges. Because more people than expected are retaining coverage, we are seeing a higher number of claims than expected when the product was priced. Prior rate increases partially mitigated these impacts. We have adjusted for this persistence with our newer products, priced with updated lapse rates assumptions of 1% or less.
In conjunction with this ongoing review process, Genworth has adopted a more proactive strategy in managing our long term care business. First, we will continue to work closely with regulators to implement rate increases on certain older blocks of long term care business in an attempt to bring these blocks closer to break even going forward. Second, we will continue to evaluate the experience of our newer blocks of long term care insurance business. If the actual or projected experience warrants, we will seek a premium rate increase earlier in the product lifecycle. And third, we will continue to leverage our more than 40 years of experience to develop new products that are both innovative and incorporate our most current pricing assumptions.
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During IFA II we applied larger increases to policies with lifetime benefit periods. Among other things, this is because lifetime benefits can correlate to longer claim durations. The average claim on a policy with lifetime benefits lasts 45% longer than the average limited duration policy claim.1 Lifetime policies represent a greater, less predictable risk because the maximum benefit is uncapped.
In-Force Rate Action III (IFA III)In the third quarter of 2013, Genworth began filing rate increases on Privileged Choice and Classic Select policies. Our intent is to intervene earlier in the life of the products to avoid larger increases in the future and provide greater transparency to our policyholders and distribution partners.
To achieve this goal, we will continue to compare the actual and projected experience of our in-force long term care insurance products against the assumptions used when we brought the products to market.
In-Force Management Project (IFMP)In 2007, after identifying a higher than anticipated persistency rate, Genworth implemented a rate increase of 8 to 12% on 3-Day, Pre-PCS, PCS I and PCS II policies.
In-Force Rate Action I (IFA I)In 2010, Genworth applied an 18% increase on PCS I and PCS II policies.
In-Force Rate Action II (IFA II)In 2012, Genworth applied rate increases on Pre-PCS, PCS I, PCS II and Choice I policies.
Rate Increase History and Overview
Genworth seeks premium rate increases only after careful consideration. Our intent is to ensure our business remains strong for years to come, so we can deliver on the promises we have made to our policyholders and partners.
1 Source: Genworth Reimbursement Claims Experience through 12/31/13.
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Requested Increases by Product and Benefit Period The table below shows the increases Genworth has requested by product and benefit period. In certain states, the requested amounts may vary due to regulatory requirements.
Please Note • Previous rate increase requests may not have been approved in all states. If past requests were not fully approved in states, subsequent rate increase requests will be larger than reflected in the table.
• The actual amount of approved and implemented premium rate increases varies by state.
Policy Series Requested Rate Increase Amount (Years Sold) (Year Increase Requested)
IFMP IFA I IFA II Limited IFA II Lifetime IFA III (2007) (2010) (2012 Benefit Period) (2012 Benefit Period) (2013)
3-Day 8% - - - (1974 - 1988)
Pre-PCS 9% - 35% 88% (1988 - 2003)
PCS I 12% 18% 60% 95% - (1993 - 2005)
PCS II 11% 18% 63% 78% - (1997 - 2005)
Choice I - - 44% 60% - (2001 - 2008)
Classic Select - - - - 5% - 12.8% (2003 - 2013)
Privileged Choice - - - - 5% - 12.8% (2003 - 2013)
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Alabama Group TrustIncluded in IFMP, IFA I and IFA II are certificates issued under the Alabama Group Trust. The Alabama Group Trust, established in 1986 by a Genworth predecessor, sold a series of group long term care insurance certificates between 1986 and 2000. Although certificates issued under the Alabama Group Trust were sold in many states, these certificates were issued under a group master policy issued in Alabama. Products issued under the Alabama Group Trust include Pre-PCS, PCS I and PCS II. Choice products were not issued under the Trust, except in New Jersey.
Rate Stability and Loss Ratio RegulationsIn the early to mid 2000’s, most states adopted the NAIC model regulation legislation called “Rate Stability.” Rate Stability governs how and when insurance companies file for rate increases and price long term care insurance products.
“Loss Ratio” is the standard approach for filing rate increase requests for policies sold before the adoption of Rate Stability.
Certain states have either not adopted Rate Stability or adopted a modified version. In these states, the rate increase requests may be different from the requests made in states that have adopted Rate Stability.
Other Helpful Information
MoratoriumOur understanding of policyholder behavior has deepened considerably since our first rate increase in 2007. Specifically, very few policyholders lapse their policies in connection with a rate increase. This demonstrates that policyholders value their coverage.
However, we recognize that policyholders are increasingly frustrated by the potential lack of transparency into possible future increases. For this reason, Genworth adopted a different approach in connection with IFA II, specifically for rate actions requested in 2012.
In situations where the state approves the entire amount requested, whether implemented completely in the first year or over a multi-year period, we intend to not seek additional increases for at least five years from the time a state approves the premium rate increase.
We believe this approach allows our policy-holders to plan and gives them the time and information necessary to understand and fully consider options.
Please Note The five-year moratorium only applies to IFA II. The moratorium does not apply to IFA III.
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Policies Not Affected The following policies have not to date been affected by a premium rate increase:
• Privileged Choice® Flex
• Privileged Choice® Flex 2
• Privileged Choice® Flex 3
• Cornerstone AdvantageSM
• My Future, My PlanSM
• Long Term Care Business Solutions
Exceptions and Variations
Policyholders Currently on ClaimPolicyholders will receive notification of a rate increase at least 60 days prior to their policy anniversary date. If a policyholder is currently on claim and the policy provides a Waiver of Premium benefit, the policyholder is not required to pay the increased premium until the benefit no longer applies. Once the policyholder comes off of claim, the policyholder will be responsible for future premium payments as they become due.
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We recognize the impact rate actions have on our policyholders and distribution partners, and we are committed to providing dedicated support throughout the process. As states approve requested rate increases, we communicate by:
Notifying distribution partners of the percentage increases through the bulletin process.
Providing agents with a list of all affected policyholders. Please see Addendum #3. The list will be sent prior to any policyholder communications, giving agents an opportunity to proactively contact their clients. The lists are available to the servicing agent on the IFA Resources Section of Genworth PRO.
Mailing initial notices to impacted policyholders at least 60 days before their anniversary billing dates. The individual policyholder notification letters are available to the servicing agent on the IFA Resources Section of Genworth PRO.
List Bill PoliciesList Bill policies frequently have common billing dates, but different anniversary dates. Notification will be prior to the member/employee’s anniversary/rate increase effective date. Therefore, policyholder lead times will vary.
Communication Timeline
1
2
3
Please Note The first policyholder mailings begin one week following agent notification.
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We partnered with top financial professionals to learn how to successfully explain these changes to policyholders and help them evaluate their options. Here, we share some of their best practices:
Prepare for the ConversationBefore having a conversation with policyholders, take time to review their file and familiarize yourself with their situation. Perhaps a client purchased the policy as part of an overall financial plan. Maybe the experience of a family member or friend encouraged them to seek long term care coverage. Reminding yourself of your client’s personal story will help guide your conversations.
As you prepare for these conversations, review the tools available in this guide. Several helpful tools in the Addendum provide important facts and statistics you may find useful to prepare for your conversation. Here are some examples:
• The LTC fact sheet (45771C) provides information that suggests a shorter benefit period may be an appropriate alternative to lifetime options for certain policyholders. A shorter benefit period may reduce your client’s base premium and the amount of the applied rate increase.
• Cost of Care Information (Addendums #1 and #2) will help you consider whether reducing your client’s daily benefit or Benefit Inflation Option is an appropriate solution. Compare the costs of different types of care across different states. Discuss adjusting your client’s benefits based on the care they think they’ll need and the area in which they expect to live.
Once we send your client a notification letter, we recommend you proactively call and explain the increase, available options, your recommendation, and how the client might respond to Genworth (see Addendum #4 for a copy of the Sample Policyholder Letter). Meeting in person is also a good option if time permits, as it will give you an opportunity to further solidify your relationship and discuss options.
Help Clients Understand Their Options
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Policyholders will likely have questions as they receive notification of their rate increase. They will look to their financial professionals to guide them on the appropriate action they should take, if any.
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Emphasize the Value of the Policy Many clients purchase long term care insurance to protect their hard-earned assets from the impact of an unplanned long term care event. Often, the premiums paid on existing policies are far less than the premiums for a policy purchased today.
Compare the cost of the policy they purchased against the cost of a policy purchased today. For example, the table below shows the premium of a Privileged Choice policy and the premium of a Privileged Choice Flex 3 policy available today. Although the Monthly Benefit and policy maximum benefit are the same, the cost of a policy available today is much higher than the cost of a similar policy previously sold.
2
Older Policies can have Considerable Value
Data Then: Privileged Choice Now: Privileged Choice Flex 3
Policyholder Age 50 50
Monthly Benefit $4,500 $4,500
Benefit Period 3 Years 3 Years
Underwriting Class Married, Preferred Married, Preferred
BIO 5% Simple 5% Simple
Elimination Period 90 Days 90 Days
Policy Maximum Benefit1 $162,000 $162,000
Annual Premium S/B $8382 $15222
1 Policy values are as of policy issue - Monthly benefit & Policy Maximum Benefit will increase over time due to inflation option.
2 Current rates as of 01/2015 - LTC policies are guaranteed renewal & premium rates can be changed on a class basis by state.
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Adjustment Option 1: Select a shorter benefit periodOur claims experience shows some interesting statistics:1
• 42% of total claims last less than 1 year.
• Of those lasting longer than one year, the average claim is 4 years.
• Only 15% of claims last longer than 5 years.
As shown below, policyholders could consider converting their lifetime benefit period to a reduced benefit period to maintain or even reduce their current premiums.
1 Source: Genworth Reimbursement Claims Experience through December 31, 2013.
2 Issued in 2001. Based on $100 original DBA, 50 day EP, lifetime benefit period, 5% compound.
3 Issued in 2009. Based on $3000 original monthly benefit amount, 30 day EP, lifetime benefit period, 5% compound.
Cost Reduction through Shorter Benefit Periods
ProductToday’s Annual Premium Before the Rate Increase
New Premium (With the rate increase)
With Lifetime Benefit Period
With Reduced Benefit Period
Choice I2 $2,570Lifetime:
60% Rate Increase $4,112
4 Year: 44% Rate Increase
$2,592
Privileged Choice 2.13 $4,286
12.8% Rate Increase $4,834
12.8% Rate Increase $2,835
Review Client Options to Adjust BenefitsAlthough policies with increased premiums still provide considerable value in light of the significant benefits they provide, some clients may not be in a financial position, or be willing, to pay for the same level of coverage at the new rates. There are several options available to clients who want to maximize the value of their coverage while keeping premiums at approximately the same level. Many of these options may be used together to balance policyholders’ coverage needs with their budgets. Policyholders have 60 days from the date Genworth receives their benefit change confirmation to return to their original benefits, should they change their minds.
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Adjustment Option 2: Select reduced benefit amounts
Before changing coverage, consider the potential impactsBy reducing the maximum daily, monthly benefit, or benefit period, clients also will reduce their lifetime maximum. Policyholders have 60 days from the date Genworth receives their benefit change confirmation to return to their original benefits, should they change their minds. Once that 60 day period expires, benefits cannot be increased or changed back to the benefits originally selected. Also, if a policyholder was previously on claim, it may not be appropriate to adjust his or her daily benefit.
Consider Partnership eligibility requirements before reducing benefitsIn Partnership states, reducing benefits below a certain amount may jeopardize Partnership status and asset protection. In the four original Partnership states of California, New York, Indiana and Connecticut, our administrative system prevents the adjustment of benefits below partnership minimum requirements. If a policyholder wishes to decrease benefits below Partnership minimums in the four original Partnership states, the policy will be converted to the non-Partnership policy form available at the time of original policy issue. Although benefit reductions are allowed in all Partnership states, the policyholder is required to sign a waiver of acknowledgement before reducing benefits.
ProductToday’s Annual Premium Before the Rate Increase
New Premium (With the rate increase)
Original DBA3 of $100 Reduced Original DBA to $80
Choice I1 $2,570Current DBA $180
$4,112Current DBA $144
$3,290
Privileged Choice 2.12 $4,286
Current Monthly Benefit Amount $3,646
$4,834
Current Monthly Benefit Amount $2,917
$3,867
1 Issued in 2001. Based on $100 original DBA, 50 day EP, lifetime benefit period, 5% compound. 2 Issued in 2009. Based on $3000 original monthly benefit amount, 30 day EP, lifetime benefit period, 5% compound. 3 DBA is Daily Benefit Amount.
Cost Reduction through Reduced Benefit Amounts
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Original Partnership statesCalifornia, New York, Indiana and Connecticut require certain minimum daily/monthly benefits and an inflation option to maintain Partnership status.
Partnership Expansion statesThe Deficit Reduction Omnibus Reconciliation Act of 2005, signed into law on February 8, 2006, encouraged the expansion of Long Term Care Partnership programs to new states. Currently, there are 351 states with Partnership programs affected by the rate increase. In these states, reducing the daily benefit generally does not affect Partnership status. However, changing the inflation protection benefit will likely impact Partnership eligibility.
1 Partnership Expansion state impacted by rate increase - AL, AZ, AR, CO, FL, GA, ID, IA, KS, KY, LA, ME, MD, MN, MO, MT, NE, NV, NH, NJ, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, VA, WI, WV, WY
State Inflation Minimum Daily/Monthly Benefit
CA • 5% Compound up to age 70• Simple after age 70
Determined annually by State
CT • 5% Compound up to age 70• Ages 65+, 5% Compound
increases daily benefit only, maximum does not increase
Determined annually by State
IN • 5% Compound up to age 70• Simple after age 75
Determined annually by State
NY • 5% Compound up to age 80
Determined annually by State
Eligibility Requirements to Maintain Partnership - Original States
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In both the original and expansion Partnership states, if the policyholder decreases benefits below Partnership minimum requirements, the policy will convert to non-Partnership status. In the original Partnership states, a new policy form will be issued. In both Partnership and Partnership Expansion states, benefit reductions are permitted. However, the policyholder must sign a waiver of acknowledgement. Only reductions to daily/monthly benefits and inflation require a waiver. Partnership policyholders may reduce maximum benefits payable and/or increase elimination periods without affecting the policies’ Partnership status.
State Inflation Minimum Daily/Monthly Benefit
SD • Ages 18 - 60, Compound inflation• Ages 61 - 75, Some form of either
Simple or Compound• Ages 75+, No inflation required
$100/day
All • Ages 18 - 60, Compound inflation• Ages 61 - 75, Some form of either
Simple or Compound• Ages 75+, No inflation required
N/A
Requirements to Maintain Partnership1 - Expansion States
1 Please note: Many states have adopted their own interest rate requirements for Partnership.
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Adjustment Option 3: Select a longer elimination periodIf the policyholder doesn’t mind spending more out-of-pocket for the first few months of receiving long term care, lengthening the elimination period can also help control premiums. Additional out-of-pocket costs based on a longer elimination period may be less than the total cost resulting from the rate increase.
Adjustment Option 4: Select an inflation option that grows more slowlyThe cost of long term care has increased in the past by as much as 5% per year. This amount varies by the type of care selected and the region in which care is received (see Addendum: #1 Cost of Care Increases by Care Type for more information). However, one way to reduce premiums is to select an inflation option that grows more slowly.
Consider converting policies with a 5% compound inflation option to a 5% simple inflation option (in states permitting this option) to reduce the effect of premium increases.
When considering this option, remember when a reduction in inflation protection is processed, the current benefit amount is recalculated from the original effective date of the policy or certificate based on the new inflation protection selected.
Ideally, a client’s daily benefit maximum should be close to the cost of care in their area (see Addendum: #2 Cost of Care by State for more information). If they moved to a region where the cost of care is lower or plan to move in the future, this may be an appropriate alternative to reduce premiums.
1 Issued in 2001. Based on $100 original DBA, 50 day EP, lifetime benefit period, 5% compound.
2 Issued in 2009. Based on $3000 original monthly benefit amount, 30 day EP, lifetime benefit period, 5% compound.
Cost Reduction through Reduced Inflation Protection
ProductToday’s Annual Premium Before the Rate Increase
New Premium (With the rate increase)
With 5% Compound Inflation
With 5% Simple Inflation
Choice I1 $2,57060% Rate Increase
$4,11260% Rate Increase
$2,380
Privileged Choice 2.12 $4,286
12.8% Rate Increase$4,834
12.8% Rate Increase$3,969
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Adjustment Option 5: Consider a non-forfeiture optionIf policyholders have reviewed the other options, but found that none suit their needs, there is no reason to lose the existing value of the policy. Before cancelling any policy, financial professionals should tell their clients about the non-forfeiture options available.
• Non-Forfeiture Option If a policyholder elected the optional Non-Forfeiture Benefit at the time of policy purchase
and their policy lapses after this benefit has been in force for the contractually required period of time, they will receive a limited benefit. Generally, this benefit provides a reduced, paid-up pool of money equal to the total of all the premiums paid or an amount equal to one month (30 days) of the Nursing Facility benefit at the time their coverage lapses, whichever amount is greater.
• Contingent Non-Forfeiture Endorsement A Contingent Non-Forfeiture benefit allows the policyholder to have a paid-up long term care
insurance policy with benefits equal to the greater of 30 days of the daily benefit or the total of premiums paid. The Contingent Non-Forfeiture Option is available for 120 days following their increased premium due date. If a policyholder lapses the policy any time during this 120 day period, we will assume they have chosen to exercise this endorsement.
• Limited Non-Forfeiture Option and Optional Limited Benefit An Optional Limited Benefit, if exercised, allows the policyholder to have a paid-up long term
care insurance policy with benefits equal to the total premium paid, excluding any waived premium, less any claims paid. The Optional Limited benefit Option is available to customers for 120 days after the Billing Anniversary Date on which the rate increase is effective. As this option could significantly reduce the policy benefits, we encourage policyholders to keep or reduce existing coverage, rather than elect the Optional Limited Benefit Option. A policy lapse at any time within the 120 days following the increased premium due date will be deemed as the election of this benefit.
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Throughout this period of change, one fact remains true: the consumer need for long term care insurance is stronger than ever. That’s why we are providing many options for policyholders to maintain their coverage as rates increase. We continue to make tough but smart decisions designed to give our policyholders transparency into rate increases, coverage options and greater predictability of premiums.
Our distribution partners can continue to rely on us to bring industry-leading long term care planning solutions to market. We are committed to providing a balance of value for our distribution partners, our clients and for Genworth. Our ultimate goal is to meet the evolving needs of today’s consumers and, most importantly, to be there when policyholders need us most — at the time of claim.
Conclusion
Ask Us For Help If you have questions or would like to run quotes for your clients, please call us. We’re happy to help you explain the situation to your clients, and help you walk them through their options. Our Customer Service Team can be reached at:
IFMP, IFA I and IFA II877 710.08188:30 a.m. - 8:00 p.m. Monday - Thursday9:00 a.m. - 8:00 p.m. Friday
IFA III866 751.6106 AARP Endorsed888 274.6124
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Addendum #1
Cost of Care Increases by Care Type
1 Percentage increase represents the compound annual growth rate for surveys conducted from 2009 to 2014.
Homemaker Services
Hourly Rates
Home Health Aide Services
Hourly Rates
Adult Day Health Care
Daily Rates
Nursing Home(Private Room)
Daily Rates
Nursing Home (Semi-Private Room)
Daily Rates
Assisted Living Facility (One Bedroom – Single Occupancy)
Monthly Rates
RATE RANGE MINIMUM MEDIAN MAXIMUM
MEDIANANNUAL RATE1
FIVE-YEARANNUAL
GROWTH2
HO
ME
CO
MM
UN
ITY
FAC
ILIT
Y
$8 $20 $40 $44,616 2%
$8 $20 $40 $45,760 1%
$10 $69 $242 $17,904 3%
$600 $3,600 $11,250 $43,200 2%
$90 $220 $1,255 $80,300 4%
$101 $250 $1,255 $91,250 4%
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PA
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MA
MD
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UT
AZ
OR
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MT
AK
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NC
SC
GA
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TN
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MI
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PA
NY
VT
NH
MA
MD
DE
NJ
CTM
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UT
AZ
OR
WA
ID
WY
MT
AK
FL
NC
SC
GA
AL
MS
TN
LA
VA
RI
DC
$31,
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$9,4
25
$20,
800
$20,
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$20,
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$16,
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$16,
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$15,
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23
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24
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Policyholder Last Name
Policyholder First Name
Policy Number
Issue State
Current Mode
Current Premium
New Premium
% Increase
Original Issue
Effective Date
Rate Increase Effective
Date
Smith Terry UCG0000001 VA Annual $10,999.99 $12,999.99 118% 1/1/1998 1/1/2014
Smith Terry UCG0000001 VA Annual $10,999.99 $12,999.99 118% 1/1/1998 1/1/2014
Smith Terry UCG0000001 VA Annual $10,999.99 $12,999.99 118% 1/1/1998 1/1/2014
Smith Terry UCG0000001 VA Annual $10,999.99 $12,999.99 118%* 1/1/1998 1/1/2014
Smith Terry UCG0000001 VA Annual $10,999.99 $12,999.99 118%** 1/1/1998 1/1/2014
* Phased increases – This percentage is the total amount of increase to be phased over multiple years.
** Certificates were issued under a group master policy governed by the laws of the trust state. The rate action is implemented in accordance with trust state requirements.
Addendum #3
Sample List of Impacted Policyholders
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Addendum #4
Sample Policyholder Letter*
Dear Policyholder,
We are writing to notify you that the premium for your Long Term Care (LTC) insurance policy will increase as outlined below.
Genworth is committed to providing long term care insurance benefits to our policyholders when they need them most. As part of our commitment to meet the future needs of our policyholders, we routinely monitor the experience of our long term care insurance policies. Based on our analysis, we have determined that a premium increase is necessary on certain long term care insurance policies, and your policy is one of those affected.
We understand that a premium rate increase can be difficult for policyholders and that certain policyholders may be unable, or unwilling, to pay the increased premium. Therefore, we are offering various options to help policyholders keep their premium at, or about its current level to help minimize the effect of the premium increase. In addition, we are offering a non-forfeiture option that you may wish to consider. This letter and the enclosed “Frequently Asked Questions” provide detailed information about these options, including contact information for our dedicated customer service team who can assist in reviewing your options.
About the premium increaseIt is important to note that this premium increase is being implemented in accordance with the laws and regulations of the state in which your policy was issued. The premium increase is not based upon a change in your age, health, claims history or any other individual characteristic. Our decision to increase premiums is primarily based upon the fact that the expected claims over the life of your policy are significantly higher today than we originally anticipated when your policy was priced. Our decision to increase premiums was not determined based upon the current economic environment.
Effect on your premium rate
If the rate increase is not phased:The premium for your long term care insurance policy is scheduled to increase from $X to $Y on your next billing anniversary date. This represents an increase of Z% in the premiums for your policy.
This letter is not a bill and you will receive a billing statement prior to your billing anniversary date or if using automatic deduction to pay premiums, your designated account will be drafted with the new premium amount.
* State Variations May Apply
FOR PRODUCER USE ONLY. NOT TO BE REPRODUCED OR SHOWN TO THE PUBLIC.
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If the rate increase is phased:The premium for your long term care insurance policy is scheduled to increase from $X to $Y in a phased manner beginning on your next billing anniversary date. It will be phased in on the following billing anniversary dates according to the schedule below which represents an increase of Z% in the premiums for your policy.
In addition, please note that in accordance with the terms of your policy, we reserve the right to change premiums and it is [possible or likely] that your premium will increase again in the future.
Billing Anniversary Date [01/01/2011] [01/01/2012] [01/01/2013] [01/01/2014]
Premium Prior to Billing Anniversary Date [$99,999.99] [$99,999.99] [$99,999.99] [$99,999.99]
New Premium on Billing Anniversary Date [$99,999.99] [$99,999.99] [$99,999.99] [$99,999.99]
The information above illustrates how your long term care insurance policy premium increase will be phased in over time. This letter is not a bill and you will receive a billing statement prior to your next billing anniversary date and before each subsequent billing anniversary date. If using automatic deduction to pay premiums, your designated account will be drafted with the new premium amount.
What are my options? Keep Your Current Coverage By Paying the New Premium
You may continue your current coverage by paying the new premium shown on the billing statement that you will receive shortly.
• If you are currently paying your long term care insurance premium by automatic deduction from a designated account, please be aware that the transfer from that account will be at the new premium amount.
• If your payment is made via a third-party account or online banking, please make appropriate arrangements, if necessary, prior to the billing anniversary date to revise the payment amount.
• If you are a policyholder currently on claim and not paying premium due to the Waiver of Premium provision in your policy, you do not need to pay the new premium at this time. This letter is notifying you of the increase that will become payable in the future if the Waiver of Premium provision is no longer in effect.
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Reduce Your Coverage & Keep Your Premium About the Current Level You may keep your premium at or about its current level by electing available options that may help minimize the effect of the premium increase, including the following:
• You may choose to reduce your maximum daily or monthly benefit, or
• You may choose to adjust your benefit period, inflation option or elimination period.
Please Note By reducing your maximum benefit or benefit period, your lifetime maximum is also reduced. In addition, other benefits may be proportionately reduced. Any benefits paid will be deducted from the reduced Lifetime Maximum. If you have previously been on claim, adjusting your elimination period may not be appropriate. Please note that some states require policyholders to maintain minimum benefit level which may limit your reduced benefit options. We are happy to inform you of any such limitations applicable to your policy in the event you contact us for this information.
IMPORTANT:
If not in California:If you choose to decrease your benefits, you may change your decision in writing within 60 days of our written confirmation of your benefits reduction. Following this, you cannot increase your benefits or go back to your original benefits.
If in California:According to the conditions of your policy, you may be able to reapply for an increase in your benefits at a later date.
If the Limited Non-Forfeiture Option is available: You may Select a Limited Benefit with No Further Premium Requirement
You may select a Limited Non-Forfeiture Benefit Endorsement. As a result of this premium increase, we are offering a limited Non-Forfeiture Option. This option allows you to elect a limited paid-up long term care insurance benefit. This benefit provides a paid-up policy with total benefits equal to the total premium paid, excluding waived premium, less any claims paid.
Please Note This Endorsement could significantly reduce the policy benefits. Please review the Limited Non-Forfeiture Benefit Endorsement for more detailed information prior to making this election.
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If the Optional Limited Benefit Endorsement is Available: You may select an Optional Limited Benefit Endorsement.
As a result of this premium increase, we are offering an Optional Limited Benefit. This endorsement allows you to elect a limited paid-up long term care insurance benefit. This benefit provides a paid-up benefit with total coverage equal to the total premium paid, excluding waived premium, less any claims paid.
Please Note This Endorsement could significantly reduce the policy benefits. Please review the Optional Limited Benefit Endorsement for more detailed information prior to making this election.
If the Non Forfeiture Rider is Available:
You may exercise the Non-Forfeiture Rider. Your policy includes the Non-Forfeiture Rider which you may elect to exercise at any time. This Rider allows you to have a paid-up long term care insurance benefit as described in the Rider.
Please Note This rider could significantly reduce the policy benefit. Please review the Non-Forfeiture Rider in your policy for more detailed information prior to making this election.
If the Contingent Non Forfeiture Option is Available:
You may select a Contingent Non-Forfeiture Benefit Endorsement. This rate increase qualifies you to receive a Contingent Non-Forfeiture Benefit. This endorsement allows you to reduce your policy benefits so the required premium payments are not increased and convert your coverage to a paid-up status with a shortened benefit period and reduced benefits plan. A policy lapse at any time during the 120-day period following the due date of the increased premium will be deemed as the election of this benefit.
Please Note This Endorsement could significantly reduce the policy benefit. Please review the Contingent Non-Forfeiture Benefit Endorsement for more detailed information prior to making this election.
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Tell us what decision is right for you.
Please carefully evaluate your individual situation before selecting from these options. We believe that Long Term Care insurance should be considered in every financial plan and encourage you to maintain your policy to retain the valuable protection it provides.
As you evaluate what is best for you, we also encourage you to review the current and projected cost of care in your area, as well as how much of that amount you are willing and able to pay from your own savings. For current cost of care information specific to your area, please visit our website.
We will be happy to help you review each of these options. If you would like to modify your benefits to reduce your premium, please contact your insurance agent or our dedicated customer service team to review your options.
We appreciate the opportunity to serve you.
Sincerely,
Elena Edwards President, Long Term Care Insurance Genworth Life Insurance Company
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Q: Why is Genworth raising the long term care insurance rates?
A: Our decision to increase premiums is primarily based upon the fact that the expected claims over the life of your policy are significantly higher today than we originally anticipated when your policy was priced. The premium increase is not based upon a change in your age, health, claims history or any other individual characteristic. Our decision to increase premiums was not determined based upon the current economic environment. It is important to note that this premium increase is being implemented in accordance with the laws and regulations of the state in which the state your policy was issued.
Q: The letter states that Genworth “reserves the right to change premiums and it is [possible or likely] that your premium rate will increase again in the future.” What does this mean?
A: Your policy gives us the right to increase your premium on a class-wide basis. Therefore, we reserve the right to change premiums again in the future, on a class-wide basis, if our actual or projected experience warrants an increase. We routinely send you a brochure entitled “Important Information About Long Term Care Insurance Premiums,” reminding policyholders that premiums can be increased on a class-wide basis. Since the expected claims over the life of your policy form are significantly higher today than we originally anticipated when your policy was priced, it is [possible or likely] that your premium rate will increase again in the future.
Q: Are all policyholders with the same policy series in the same state where my policy was issued receiving the same rate increase?
A: The premium rate increase for policyholders with a Lifetime Benefit Period is higher than the premium rate increase for policyholders with a Limited Benefit Period (for example, a 5 year benefit period), although both classes of policyholders will receive a premium rate increase. The premium rate increase is higher for those policyholders with a Lifetime Benefit Period because the expected claims over the life of policy are disproportionately higher for policyholders with a Lifetime Benefit Period than for policyholders with a Limited Benefit Period. As further described below, policyholders may have the option of choosing from several reduced benefit options in order to maintain approximately the same premium level. This includes reducing their benefit period from a Lifetime Benefit Period to a Limited Benefit Period (for example, a 5 year benefit period).
If the rate increase is phased:
Q: Why is my premium increase being phased in over several years?
A: In accordance with the requirements of the state (commonwealth or district) where your policy was issued, the increase is being phased-in over the period of years reflected in the letter.
Addendum #5
Policyholder Frequently Asked Questions
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Q. But, I’ve never filed a claim. Why am I getting a rate increase?
A. Premiums are increasing for all policies in your policy class and are not increasing due to a change in your age, health or claim activity.
Q: I am currently on claim. Am I affected by this increase?
A: Where the premium rate increase is applicable to your policy, and your policy provides for a Waiver of Premium benefit, you will not be required to pay the increased premium until such time as the Waiver of Premium benefit no longer applies, as provided for in your policy. If your policy does not provide for a Waiver of Premium benefit, you will be required to pay the increased premium. Please call one of our customer service representatives toll free at 877-710-0817 so we may answer your questions based on your specific situation. Please note however, that reducing benefits while on claim is generally not advisable.
If Limited Non-Forfeiture Option is available:
Q: I can’t afford to pay higher premiums.
A: With this rate increase you may have the option of choosing from several reduced benefit options in order to maintain approximately the same premium level. If your premium payment mode is more frequent than annual, consider changing your premium payment mode to annual. Additionally, a Limited Non-Forfeiture Option is available. We encourage you to contact us, your insurance agent, or your trusted financial advisor to evaluate your particular situation in order to help you select the option that you believe is best suited to your individual needs.
Q: What is a Contingent Non-Forfeiture Option?
A: A Contingent Non-Forfeiture benefit, if exercised, allows the customer to have a paid-up long term care insurance policy with benefits equal to the greater of 30 days of your daily benefit or the total of premiums paid. The Contingent Non-Forfeiture Option is available to customers for 120 days after the next Billing Anniversary Date on which the rate increase is effective.
As this option could significantly reduce the policy benefits, we encourage you to keep or reduce your existing coverage rather than elect the Contingent Non-Forfeiture Option. Please review the Contingent Non-Forfeiture Benefit Endorsement for more detailed information prior to making this election. Please note that a policy lapse at any time within the 120 days following the increased premium due date will be deemed as the election of this benefit.
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If a Non-Forfeiture Option is available:
Q: I can’t afford to pay higher premiums.
A: With this rate increase you may have the option of choosing from several reduced benefit options in order to maintain approximately the same premium level. If your premium payment mode is more frequent than annual, consider changing your premium payment mode to annual. Additionally, your policy includes a Non-Forfeiture benefit, which may be exercised at any time.
Q: What is the Non-Forfeiture Option?
A: The Non-Forfeiture benefit, if exercised, allows the customer to have a paid-up long term care insurance policy according to your contract provisions.
As this option could significantly reduce the policy benefits, we encourage you to keep or reduce your existing coverage rather than elect the Non-Forfeiture Option. Please review the Non-Forfeiture Benefit in your long term care contract for more detailed information prior to making this election.
If Limited Non-Forfeiture Option, Contingent Non-Forfeiture Option and Non-Forfeiture Option are NOT available:
Q: I can’t afford to pay higher premiums.
A: With this rate increase you may have the option of choosing from several reduced benefit options in order to maintain approximately the same premium level. If your premium payment mode is more frequent than annual, consider changing your premium payment mode to annual.
Q: If I decrease my benefits now, can I change my mind and increase my benefits in the future?
A: Once you decrease your benefits, you may change your mind and return to your pre-decreased benefit amounts for a period of 60 days from the date of our benefit change confirmation to you.
If not in California: Unfortunately, once you decrease your benefits, you cannot increase your benefits or go back to your original benefits after this 60 day period of time.
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If in California: You may be able to reapply for an increase in your benefits at a later date based on your contract provisions.
Before making a decision, we encourage you to carefully consider each option available to you and visit Genworth.com/costofcare to learn more about the expected cost of care in your area.
Q: If I wish to cancel my policy, what do I do?
A: We encourage you to keep this important coverage. There may be options available for you to reduce your benefits in order to keep your premium at or around the same amount as before the rate increase. You may also be able to exercise a nonforfeiture option which would provide a paid up policy with a shortened benefit period. We encourage you to consult with your family, your insurance agent, or trusted financial advisor before making a decision to reduce or cancel this coverage. If you choose to cancel your policy we will be happy to do so upon our receipt of your signed and dated request.
Q: Can I reverse my decision to cancel my policy?
A: Once you cancel your coverage, you may change your mind and request that we reverse this request for a period of 60 days from the date that we confirm the cancellation of your coverage. Unfortunately, after this 60 day period your request to cancel your policy cannot be reversed. We encourage you to consult with your family, your insurance agent, or trusted financial advisor before making a decision to reduce or cancel this coverage.
©2015 Genworth Financial, Inc. All rights reserved.
Insurance and annuity products: Are not deposits.
Are not guaranteed by a bank or its affiliates. May decrease in value.
Are not insured by the FDIC or any other federal government agency.
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