Lawsuits and Investigations Against Insurers for LTC

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Major insurance companies like Unum Group, Genworth Financial, and MetLife have faced financial issues in their long-term care insurance business due to underestimating the costs of future claims and longevity of policyholders. These challenges have led to significant reserve increases and stricter claims handling processes. Government investigations and lawsuits have scrutinized these practices:

  1. Unum Group: Agreed to add $2.1 billion to its long-term care insurance reserves over seven years following discussions with Maine insurance regulators​​.
  2. Genworth Financial: Faced regulatory scrutiny and had to adjust its premium rates and claims practices to stabilize its long-term care insurance segment.
  3. MetLife: Stopped selling new long-term care insurance policies in 2010, partly due to the challenges in accurately predicting long-term liabilities.

These cases reflect the broader industry trend of reevaluating long-term care insurance underwriting and claims handling practices in response to financial pressures.

Major insurance companies have faced several financial issues in their long-term care insurance businesses, including underestimated life expectancies, rising healthcare costs, low-interest rates affecting reserves, and inadequate initial pricing. These challenges have led to stricter claims handling, increased premiums, and some companies ceasing to offer new policies. Investigations and lawsuits have targeted companies like Unum Group, Genworth Financial, MetLife, John Hancock, Transamerica, and Prudential, focusing on claims denials and premium rate increases, prompting regulatory scrutiny and settlements to address these practices. For detailed examples and outcomes, it’s advisable to consult specific regulatory and legal documents related to each company.

John Hancock Insurance has faced significant legal and regulatory scrutiny related to its handling of long-term care insurance policies. Here are some specific instances:

  1. $26.3 Million Settlement with New York: John Hancock agreed to a $26.3 million settlement following a New York probe that found the company prematurely terminated long-term care policies for 156 policyholders between 2001 and 2019, resulting in 27,161 days of unpaid benefits. The settlement included restitution to policyholders or their beneficiaries, a contribution to New York’s Medicaid program, and a civil fine​​​​. https://www.reuters.com/legal/john-hancock-263-mln-settlement-with-new-york-over-canceled-insurance-policies-2022-08-18/
  2. Issues Highlighted by the Settlement: The John Hancock case brought to light several issues with long-term care insurance policies, such as the complexity of administering these products, the variability in policy details, especially in older policies, and the challenges policyholders face in tracking their benefits​​.
  3. Continued Regulatory Oversight: The New York State Department of Financial Services emphasized the importance of insurance companies operating in full compliance with the law to ensure policyholders receive the care and benefits they deserve. The department, along with the New York State Medicaid Program, remains committed to protecting consumers and ensuring that long-term care insurance products are administered in accordance with New York law and regulations​​. https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202208181
  4. Reinsurance Efforts: John Hancock’s parent company, Manulife, has been involved in significant reinsurance deals to manage long-term care insurance risks. For example, a notable deal with Global Atlantic aimed to re-set the marketplace’s perception of long-term care insurance and establish an active LTC reinsurance market, indicating a strategic shift in managing legacy LTCI business​​. https://www.thinkadvisor.com/2023/12/11/global-atlantic-agrees-to-4-4b-john-hancock-ltci-reinsurance-deal/

Prudential Insurance has faced legal and regulatory actions related to its long-term care insurance policies. Here are some specific examples:

  1. Settlement with the U.S. Department of Labor: Prudential was required to revise its life insurance practices after a federal investigation found that the company collected premiums for extended periods but then denied numerous claims posthumously, citing participants’ failure to provide evidence of insurability. This settlement mandated Prudential to adjust its practices to prevent such denials and to reprocess denied claims dating back to June 2019, providing benefits for those previously denied due to lack of evidence of insurability​​.
  2. Investigation by Hagens Berman: Prudential faced an investigation for potentially improperly increasing long-term care insurance premiums. The law firm Hagens Berman expressed concerns that Prudential may have imposed premiums at disparate and discriminatory rates, violating its own policy terms. This could include not returning premiums to certain policyholders when due, which could significantly impact policyholders, especially those on fixed incomes relying on these policies for security in their later years​​​​.

Genworth Financial has been involved in several significant legal and regulatory actions related to its long-term care insurance business. Some of these include:

  1. A class-action lawsuit settled for $25 million with policyholders who claimed unlawful cost of insurance increases in September 2019, which could range from 40% to 140% higher than the company’s monthly risk rates scale. This settlement aims to protect policyholders from future unlawful rate increases and ensures they are not denied death claims based on a lack of valid insurable interest​​.
  2. Another lawsuit alleged “massive fraud” in long-term care reserving practices, where Genworth Financial Inc. executives were accused of understating long-term care reserves while allowing insurance units to upstream “hundreds of millions of dollars” in dividends. The lawsuit claims that the company engaged in manipulation of expected claims duration, leading to significant premium increases for policyholders​​.
  3. Genworth also settled a securities class-action lawsuit for $219 million over allegations of misrepresentations concerning the strength of its long-term care insurance business. The lawsuit claimed that between 2013 and 2014, the company and its officers misrepresented the profitability of this core business and reported false financial results by understating necessary reserves, leading to a substantial drop in Genworth shares and damages for shareholders​​.

MetLife has been involved in various legal actions related to its long-term care insurance policies. One notable case was a class action lawsuit that alleged MetLife imposed large premium increases on policyholders after they turned 65 years old, in violation of the “Reduced-Pay at 65” rider. This rider allowed policyholders to pay higher premiums before turning 65 in exchange for reduced premiums after reaching that age. The lawsuit claimed MetLife failed to honor this agreement, leading to substantial rate increases for insureds post-65. The case, Newman v. Metropolitan Life Ins. Co., was settled with MetLife agreeing not to collect premiums beyond 50% of the pre-age 65 amount for all class members and to refund 30% of all increased post-age 65 premiums collected.

Additionally, policyholders have expressed outrage over unexpected premium increases for MetLife long-term care benefits. The “Reduced Pay at 65 Option,” which was supposed to halve premiums at age 65, reportedly did not deliver on its promise, with some policyholders experiencing a 102% increase in their premiums. These premium hikes presented policyholders with difficult choices: pay the increased rates, reduce their benefits, or drop their policies entirely, putting their financial stability and health safety at risk.

Continental Casualty Insurance, a subsidiary of CNA Financial Corp., has faced several lawsuits related to its long-term care insurance policies. These legal actions typically revolve around allegations of wrongful premium increases, denial of coverage, and deceptive practices affecting elderly policyholders.

A class action lawsuit accused Continental Casualty of engaging in illegal conduct aimed at reducing exposure to costly long-term care claims by denying claims through fraudulent, deceptive, and manipulative practices. The lawsuit also highlighted the issue of massive premium increases imposed on the elderly insureds, which contradicted the insurer’s contractual promises. This legal action pointed out that close to 400 people in Connecticut and over 20,000 nationwide could have been affected by these practices​​.

In another significant case, a nationwide class action settlement was reached on behalf of tens of thousands of individuals who purchased long-term care policies from Continental Casualty. The lawsuit claimed that the insurer wrongfully denied coverage on the premise that a facility’s nursing staff must be “on-site” 24 hours per day, despite no such requirement in the policy terms. This settlement was aimed at addressing these wrongful denials and ensuring fair treatment of policyholders​

Bankers Life faced a class action lawsuit alleging elder abuse through wrongful denial and delay of long-term care insurance claims, breach of contract, fraud, negligence, and intentional misconduct. The suit aimed to represent a large class affected by these practices in Oregon, highlighting issues with claim denials and premium increases without corresponding benefit enhancements​​.

If your family has found that the long term care insurance of a loved one is being ignored or mishandled by the insurer, you are right to be concerned. Families who do not push back on their insurer and retain expert legal counsel will find that the insurance policy is ignored and claims summarily denied. Protect your family and get them they care they need by standing up for their rights and hiring counsel.

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