Thomas J. McInerney, the President and CEO of Genworth Financial, spoke recently about the current status and future of the Long Term Care Insurance industry.
Long Term Care Insurance Conference
McInerney presented at the annual Intercompany Long Term Care Insurance conference (ILTCI) in Orlando, Florida on March 18th. He discussed the challenges carriers are facing at the moment and his thoughts on the best way to move the market in a positive direction at such a crucial turning point in the industry. Though his presentation isn’t available to view, Genworth posted a copy of his notes for the event, from which you can get a good idea of everything he covered.
As he has been saying for the past several months, McInerney repeated his assertion that a new business model and regulatory framework are “needed for a robust private market for Long Term Care Insurance”. Because long term care risk is so difficult to predict and price, a new approach is necessary to help manage policies and benefits in a long term manner, rather than the way it has been handled up until now, which consisted of massive rate increases that are few and far between.
Need for Private Market
McInerney criticized those public officials who believe private Long Term Care 
Insurance has no place in the scheme of long term care, calling those beliefs “misguided”. Allowing the private Long Term Care Insurance market to fizzle and fade will leave Americans with the options of trying to save enough cash assets to cover the actual cost of care or turning to the government, ie the taxpayers, to foot the bill for long term care. He emphasized his point again, saying that advising for an exclusively taxpayer funded solution is “irresponsible”, especially given the massive entitlement liabilities that exist.
A crucial part of the long term care issue is the need to educate Americans on the financial risk of long term care, as too many are unaware that it is even something they should be worrying about. McInerney summed up the massive retirement and long term care crisis, which stems from longer life spans, a growing elderly demographic, and the high risk of long term care. He aptly called it the “Boomers’ Perfect Storm”.
Without a private Long Term Care Insurance market, people will have to prepare for the storm by either trying to save hundreds of thousands of dollars for care alone or simply depleting all of their assets to receive care from the government. Neither of this options are ideal and rather than leave the market as is, which will likely lead to an end of the industry, Genworth and McInerney want to change methods to help all involved.
Changes to Current System
The most notable components of a private Long Term Care Insurance market that McInerney sees as necessary are as follows:
– Conservatively structured and priced new Long Term Care Insurance products that are approved by state regulators within 90 days of release
– Recognition that predicting interest rates, lapse rates, morbidity, and mortality is next to impossible, so policies should be re-rated whenever necessary to reflect real risk
– Not punishing insurance companies because every company got the predictions wrong
– Smaller rate increases more often to make them more manageable for consumers
– Have these rate increases approved by state regulators within 6 months
These changes, he believes, will help stabilize the market and ensure that the few remaining companies still in the industry won’t exit due to unpredictable regulation and a lack of certainty. As he notes, only 7.4 million Americans currently have Long Term Care Insurance. There is a serious need to expand the market by encouraging awareness and education about the issue of long term care to better help consumers adequately plan for their futures.
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