Are There Broader Implications from Genworth Report on LTC Insurance Losses?
On November 5, Genworth Financial Inc., a major player in long-term care insurance, announced third-quarter 2014 performance results, reporting a $844 million net loss that flowed from review of the company’s long-term care claims. The review required the company to reallocate more than $530 million (pre-tax) to its LTC claim reserves. Obviously that is not the kind of news that shareholders like to hear. But, it would also appear to hold larger implications.
Financial news reporters quickly followed with analysis.
From the Wall Street Journal: “Long-Term-Care Insurance: What Policyholders Should Know,” three “takeaways:”
- “A past rate increase doesn’t forestall additional hikes down the road.”
- “You’re unlikely to find a better deal by switching insurers.
- “It may be possible to cut back benefits and still have good coverage.”
From Bloomberg News: “Genworth CEO Sees Tough Turnaround from $844 Million Loss,” putting the single company’s performance into context by pointing out that “larger rivals MetLife Inc. and Prudential Financial Inc. have stopped selling long-term care insurance as results are hurt by near record-low bond yields and higher-than expected claims costs.”
From Business Insider, “An Insurance Company Underestimated How Long People Would Live– and Now Its Stock is Crashing.”
Underestimating how long people will live. Underestimating the demand for assistance with activites of daily living. Underestimating how much it costs to cover health care and social care meeds. These are calculation problems not just for the insurance companies but for individuals, families and (if we are at all realistic) governments. Don’t we need to stop addressing these issues in silos?