Genworth Left Policyholders In the Dark About Years-Long Plan to Hike Long-Term Care Premiums, Class Action Alleges [UPDATE]
Last Updated on August 12, 2022
Haney et al. v. Genworth Life Insurance Company et al.
Filed: January 28, 2022 ◆§ 3:22-cv-00055
A class action alleges Genworth Life Insurance Co.'s failure to disclose the scope of a plan to substantially increase long-term care insurance premiums has prevented policyholders from making informed decisions.
Virginia
Case Update
August 12, 2022 – Genworth Long-Term Care Insurance Class Action Settled
A settlement of the claims detailed on this page was filed on April 1, 2022 and granted preliminary approval by the court on May 2.
The deal covers all individuals who hold Genworth Life Insurance Company (GLIC) and Genworth Life Insurance Company of New York (GLICNY) long-term care Choice 2, Choice 2.1, California CADE, California Reprice and California Unbundled insurance policies, and those who have state-specific variations of those policies, in force at any time between January 1, 2013 and the date notice of the settlement is sent out. A complete list of the Genworth long-term care policy forms, and the state-specific variations of those policies, that are covered by the settlement can be found here.
The official settlement website can be found at Choice2LongTermCareInsuranceSettlement.com. As this is a “direct notice” settlement, there is no need for consumers covered by the deal to file a claim form online or by mail. Instead, notice will be sent directly to eligible consumers, who will be identified through Genworth’s policy records.
Settlement documents state that the deal provides covered Genworth policyholders with “material and comprehensive information” about the company’s future plans to seek additional rate increases, and an option for consumers to either keep their current benefits (which are subject to future rate increases) or choose from a selection of paid-up or reduced benefit options, some of which come with damages payments.
Under the settlement, Genworth, sometime in August, will send directly to class members a special election letter that discloses that the company plans to seek rate increases in most states over the next few years. The disclosures will include which policies would be affected by the rate increases and the percentage of those increases, among other information.
The letter will also detail a number of “special election options” available to consumers covered by the settlement. Depending on their policy and status, class members will be able to choose from various paid-up benefit options and reduced benefit options.
A template of the special election letter and breakdown of special election options available to class members can be found here.
Some class members, depending on what they elect, will also receive a cash payment ranging from $1,000 to 10,000.
“The monetary damages provided by the Settlement are made all the more significant when combined with the opportunity for Class Members to reevaluate their coverage premiums in light of the Disclosures and then make a new election regarding benefits going forward if they so choose,” a memo in support of the deal states.
Excluded from the settlement are Genworth policyholders whose policy entered non-forfeiture status or a fully paid-up status prior to January 1, 2014. Also excluded are those whose covered policy lapsed and is outside any period allowed by Genworth for the policy to be automatically reinstated with payment of past-due premiums, and those whose policy has otherwise terminated, as of the date notice is sent to class members or the date they would have been mailed the special election letter. The deal also excludes policyholders who are deceased before their signed special election option is post-marked for mailing back to Genworth or is faxed or emailed to the company.
A final approval hearing is scheduled for November 17, 2022.
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A proposed class action alleges Genworth Life Insurance Company’s failure to disclose the scope of a years-long plan to substantially increase long-term care insurance premiums has prevented certain policyholders from making informed financial decisions.
The 59-page lawsuit centers on Genworth Choice 2, Choice 2.1, California CADE, California Reprice and California Unbundled long-term care (LTC) insurance policies that, according to the suit, the company no longer sells but has “steadily and substantially” increased the premiums for since 2013. The case alleges that Genworth knew as early as 2012 that it would need to considerably increase rates for these policies for years to come in order to “plug [a] massive hole” in its LTC claim reserves yet never shared the details behind the planned future rate increases with policyholders, who were allegedly left with incomplete information, at best, when considering whether to re-up their policies.
“[Genworth] never disclosed this material information to Plaintiffs or any member of the Class,” the lawsuit alleges. “The statements it did make about the possibility of future rate increases were not adequate, omitted material information necessary to make the partial disclosures adequate, and resulted in Plaintiffs and the Class making policy renewal elections they never would have made.”
According to the complaint, Genworth relayed to affected LTC policyholders only that it reserved the right to change premiums in accordance with the terms of their policies and that “it is possible that your premium rate will increase again in the future.” The lawsuit charges that although Genworth framed future LTC rate increases as “possible,” the massive price hikes were, in fact, part of a carefully coordinated internal action plan by the company to raise rates on the already expensive coverage “substantially and repeatedly for years to come.”
Per the case, the planned LTC rate hikes stemmed from the results of a deep dive by Genworth into its LTC claim reserves. The company acknowledged internally that it had a substantial shortfall in its LTC reserves “much larger than it ever anticipated” and knew the hole would grow exponentially without swift action, according to the filing.
To “right the ship,” the lawsuit says, Genworth created a series of internal action plans that called for significant, systematic, multi-year rate increases across “virtually all of its policy classes.” The suit alleges that Genworth, “[i]n other words, relied almost entirely upon billions of dollars in anticipated future (but not yet filed) rate increases” to fix its claim reserve problem and remain solvent, and went so far as to depend on those future rate increases in its then-current financial reporting and executive compensation bonuses.
“This material information about Genworth’s plan for (and need for) massive future rate increases, however, was never shared with Genworth’s policyholders who would be required to pay the increases,” the case reiterates.
As the lawsuit tells it, Genworth’s apparent non-disclosure of the complete picture behind its planned LTC rate increases placed policyholders at a significant disadvantage when considering whether to stay with the company, which the suit stresses is a financial decision that often spans decades given the nature of long-term care insurance policies:
“For a policyholder, deciding whether to pay each current premium increase was decidedly different from buying into a series of sequential rate increases that would more than double the premiums they were then paying. This is especially true because each of those increased rates would have to be absorbed into the policyholder’s financial planning for years or decades to come. These nationwide rate increase action plans were material information about future LTC policy terms that Genworth withheld from its insureds in each premium increase notice the Company sent to the Class.”
According to the lawsuit, Genworth has so far issued at least six waves of rate increases for the affected policies and “has several more waves planned in the future” that have not been adequately disclosed to policyholders.
The lawsuit looks to cover all U.S. residents who have Choice 2, Choice 2.1, California CADE, California Reprice, or California Unbundled policies, and state variations of those policies, issued in any of the 50 states or the District of Columbia at any time between January 1, 2013 and the present.
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