As a leader in the long term care insurance industry, Genworth must continue to make responsible decisions to position our organization for greater stability, financial health and future growth. We are committed to bringing value to our customers and distributors by leveraging our experience to offer products that serve the needs of our policyholders and promote the viability of the long term care private insurance market.
We continue to proactively manage our business by closely monitoring emerging experience on in-force policies. Where appropriate, and subject to regulatory review, Genworth will seek smaller rate increases beginning earlier in the product lifecycle with the intent of avoiding larger rate increases in the future. We believe smaller rate increases are a better approach for consumers and regulators.
Based on the analysis of our experience, we will begin filing a rate increase in September, 2013. We will request between five and thirteen percent on certain Privileged Choice® and Classic Select® policies sold between 2003 and 2012.
We routinely evaluate our long term care claims, including claim patterns and trends and policyholder behavior. These ongoing reviews influence the management of our in-force business as well as our new product pricing. The process includes a detailed analysis of morbidity, mortality, and termination trends. Through our careful analysis, we identified a higher level of expected persistency among policyholders who are more likely to use the benefits than originally assumed. This contributed to the need for us to pursue this increase.
The decline in mortality (people living longer) in the years since these products were first priced, means more customers are reaching the age where long term care support and services are likely needed. In addition, long term care events, such as Alzheimer’s, dementia, strokes and central nervous system disorders, have caused claims to lengthen as medical advances increase the lifespan of people with these and other conditions.
We believe our products provide value to consumers as compared to the potential cost of a future long term care event, even with a modest increase. We understand, however, some clients may not be in a financial position, or may not be willing to pay for the same level of coverage at the new rates. Depending on individual circumstances, policyholders may be able to mitigate the impact of the increase by making one of several available changes to the policy, such as reducing the daily benefit, changing the benefit period or changing the inflation protection option, as applicable. In addition, certain non-forfeiture benefits may be available to policyholders.
We will continue to keep you informed as we approach the first state implementation of this rate action. Additionally, we will provide you with refreshed and new materials, training opportunities and communication tools.