Genworth Viability and Long Term Care Insurance Rate Increases Class Action

“Long Term Care is expensive. So too is Long Term Care Insurance.” So says this class action, which claims that Genworth Financial, Inc. and Genworth Life Insurance Company omitted material information about their long term care (LTC) policies when implementing premium increases.

The class for this action is all persons living in the following states who renewed their LTC policies, including those who chose a non-forfeiture option, with Genworth on Policy Form 7035 et al. since 2012: Arkansas, Arizona, Colorado, Connecticut, District of Columbia, Georgia, Louisiana, Maryland, Mississippi, Montana, North Dakota, Oklahoma, Oregon, Pennsylvania, and South Carolina. There is also a Pennsylvania subclass. 

LTC insurance is coverage for when a person requires home care, assisted living care, nursing home care, or other specialized facility care. When choosing LTC policies, individuals must weigh the costs of policies against the benefits they provide. Policies are cheaper when bought earlier in a person’s life, so policyholders are unlikely to want to change companies. They must also consider future rate increase and the financial stability of the insurance company. The complaint says that policyholders must therefore have all information available.

The plaintiffs in this case bought their policies in 2003 or 2004. However, by 2012 Genworth had a shortfall in its claims reserves. It continued to pay dividends to its parent holding company, but in 2014, an asset adequacy test showed that its loss recognition testing margin (an indicator of solvency for insurers) had gone from $3.2 billion to negative $2.6 billion in a single year. 

Genworth decided to raise rates. But the complaint says that, since the increased revenue would not show up immediately, Genworth manipulated its figures to increase its reported loss recognition testing margin by $4.9 billion. It did this in 2014, when its entire annual revenue from LTC was only $3.5 billion. 

Genworth wanted rate increases of 44-60% immediately, although it would need even more eventually. Where state commissioners approved lesser increases (for example, only 20%) Genworth planned to apply for increases every year. Policyholders were not told that the plan was to achieve increases of 60%.

The hole in Genworth’s reserves continued to grow. Genworth’s viability depended on being granted the rate increases and getting policyholders to actually pay them, instead of abandoning their policies. This was a problem; increases in Pennsylvania, for example, meant that a person who had been paying $5,000 ended up paying $11,000 for the same coverage within a span of just five years.

According to the complaint, in 2018, for the first time, Genworth announced that it planned to seek increases in premiums of at least 150% over the next six to eight years. The $5,000 policy would by then cost $28,000. At the same time, Genworth’s needs had increased, so that it actually needed 300% increases. This meant that the $5,000 policy would eventually cost $40,000, the complaint says. 

The complaint alleges that Genworth violated the covenant of good faith and fair dealing and engaged in fraudulent inducement and fraudulent omission, among other things. 

Article Type: Lawsuit
Topic: Consumer
Tags: Concealing Information, Insurance, Long Term Care Insurance, Omitting or Withholding Information