Bill Nemitz: Welcome to long term care insurance. Do you want some common sense with this?

Twenty-one years ago and over $ 75,000 ago, Linda and David Brookes had a plan: With retirement on the not-so-distant horizon, they would start putting money into their new insurance policies. long-term care. In return, when age and infirmity caught up with them, they would get the help they needed without breaking the bank or becoming a financial burden on their four children.

Then came the shakedown.

“This letter is to let you know that we recently requested a 112% premium rate increase for your long term care insurance policy,” reads the letter David received from Genworth Life Insurance. Co. this fall. Linda received the same notice, except Genworth has said they want to increase their premium by 146%.

Keyboard typos ? They wish.

Some kind of practical joke? There is nothing funny about it.

A business that is passing the buck – or in this case, the bill – for its own failure? Now we are warming up.

“It’s amazing,” Linda Brookes said in an interview last week. “I just can’t believe it.”

Nor are the hundreds of other Mainers, all in their twilight years, who logged on Thursday for an online forum on one of the insurance industry’s most colossal misfires in modern times. Long-term care insurance, once seen as the key to peace of mind and financial security, is fast becoming the mess of the century.

The Brookes are, in all respects, a responsible and careful couple.

Linda, 72, is a retired social worker. David, 81, worked for Motorola. They lived in Scarborough for 20 years before moving to Florida in 2015, convinced that when the time came for long-term care – not covered by Medicare and most extended health plans – their Genworth policies would pay the price. invoice. Not counting on their kids for money, not depleting their assets and hoping their fixed incomes might qualify them for Medicaid, no addiction whatsoever beyond the coverage Genworth promised them all these years ago. years.

They also believed, at least initially, that their monthly premiums would remain affordable – while Genworth had the right to make occasional adjustments, any rate hikes would have to be approved by the Maine Bureau of Insurance first.

But increases of 112% and 146%? Or, for other Maine policyholders, 178%? Let me take a risk here and suggest that this is more than unfair.

“It is. I couldn’t agree more,” said Eric Cioppa, the office’s superintendent, in an interview following last week’s forum. “If I’m not here to help consumers in as far as possible in this case, why am I here? “

At the root of it all is a plummeting industry-wide product. As Cioppa noted at the start of Thursday’s four-hour plus marathon, the long-term care insurance market emerged around 40 years ago and was, from the start, built on a host of assumptions. seriously erroneous:

Insurers believed they could finance future claims over the long term by investing premiums at an annual rate of return of between 6% and 8%. In fact, the bonds in which all this money was stashed performed, as Cioppa noted, “well below 4%”. This means that Genworth, like other companies that made the same mistake, now finds itself in a hole that will only get deeper as new claims come in.

Insurance companies have also taken into account a “lapse rate” – the number of customers who over time do not renew their policies – between 4 and 5 percent, as has the long-standing rate for policies of the same age. ‘life insurance. Again false – less than 1% of long term care policyholders have let their plans expire.

Finally, companies miscalculated their morbidity projections – or, to be blunt, they thought their customers would die sooner. Alzheimer’s disease and other long-term illnesses have overturned this hypothesis.

All of this brings us to the central question that had over 400 Genworth customers – with nearly 4,100 policies in Maine, it’s the state’s largest long-term care provider – glued to their computer screens. Thursday: who should have to pay for this screw-up, the customers who signed up in good faith or the company that made a colossal bet?

Linda Brookes, who, along with her husband, has already invested $ 75,057 in their Genworth policies since 1999 and would now see their premiums drop from $ 5,184 to $ 11,868 per year, was more than ready to speak up. Her much-sought-after presentation lasted over seven minutes at first, but trimmed it to meet the forum’s initial five-minute rule of thumb. Then, after the list of people wishing to speak exceeded 200, the speaking slots were reduced to just two minutes, forcing Brookes to further condense his outrage.

“I find it difficult to define the difference between financial abuse and coercion of seniors and the premium increase practices of Genworth and the (Maine Bureau of Insurance). It does indeed seem a very fine distinction, ”she said, referring not only to the latest proposed rate hike, but also to other increases and reductions in benefits that she and her husband have already suffered these past. last years.

Unlike many others who used their allotted time just to let off steam, Brookes then quickly listed his recommendations for cleaning up this mess: impose a moratorium on all bonus increases until solutions were found that take into account. customer concerns. Recognize the “erosion of trust” not only in the insurance industry, but also in the government officials who are supposed to regulate it. Factor in the savings Genworth will realize from people reducing their benefits to save their policies. Account of the money that Genworth has saved due to the deaths of policyholders earlier than expected by COVID-19. And finally, enable companies like Genworth to improve their cash reserves by investing in more than the low yield bond market.

All good ideas. Here’s another: shifting the burden of responsibility for this circus to policyholders and Genworth and other companies who from the start were much better at selling these plans than estimating their cost. That calculation could start from the top – as more than one speaker noted at last week’s forum, the annual compensation for Genworth President and CEO Thomas McInerney is north of $ 9 million. .

“This doesn’t seem to reflect a company that has a hard time saying it’s creditworthy,” Brookes observed in his pre-edited comments.

It’s hard to say where this all leads. Genworth wants its rate hike request to be completed by August, although Superintendent Cioppa won’t go beyond saying it will be resolved sometime in 2022. Genworth likely won’t get all that it needs. ‘he wants to – it’s up to Cioppa to determine whether the proposed new tariffs are “excessive and discriminatory” – but those who sit on the policies stay awake and worry about how drenched they are going to be this time around.

As Brookes put it after spending two minutes in the forum, “The best we can do is educate the public on an issue that has had serious consequences for policyholders. And I hope the powers that be seize the opportunity to do good “for the people” by legislating effective barriers “to the staggering arrogance of Genworth and other insurers.

Last Friday I received an email from Danielle Bolt, senior communications manager at Genworth. Much of it was a recap of what another company official had already said at Thursday’s meeting – all rooted in the reality that Genworth’s projections, like those of the rest of the world industry, “turned out differently than expected.”

Bolt also listed a range of options that Genworth policyholders can now choose from: Continue to pay the full premium, no matter how high. Accept further benefit reductions in exchange for a lower (but still higher) monthly bill. Or stop paying premiums now and, if and when the need arises, Genworth will pay claims up to, but not over, the total premiums paid to date. (The latter is a real laugh – any insured could have gotten the same just by putting their money in a cookie jar.)

Bolt noted, “We strive to leverage the points of contact we have with our policyholders to provide training on their coverage and potential coverage needs. “

If only they had educated themselves first.

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