Saturday, January 30, 2016

Genworth Financial and its lagging payment "system"

Genworth is one of the largest providers of long term care insurance in the U.S.  Working with them, it appears that they systematically work to delay payments.  At a minimum, they make working with them as an insurer difficult at a time when the insured is already going through a difficult period. Perhaps it seems to be just incompetence, maybe it is due to their unwillingness to hire an adequate work force in order to limit expenses, or it could be done intentionally, although that seems unlikely as it would be so stupid for them to do that as a regulated entity, however lightly the insurance industry attracts regulation.  Stupidity, of course, is always possible.

As a corporation, Genworth(GNW) is performing poorly.  Its stock price of $2.78 as of yesterday's close is at a seven year low, excluding the even lower prices of recent weeks.  The 52 week high was $9.19.  Its S&P bond rating is BBB- and its Moody's rating is Baa1, both basically the same, and while that might be adequate in parts of corporate America it is unequivocally poor for a financial firm.  For fiscal year 2014, the last full year reported, Genworth lost $1.2 billion, and they have had losses in four of the last five quarters.  The losses are partially due to "special items" and "discontinued operations", but even without them the net would still have been negative.  Also, even if part of the losses is from these supposedly non-recurring items, they still reduce capital.

Common equity is twice long term debt totals, but that is not all all the best capital measure for a financial company.  Whatever affects liquidity is, and that is not a current problem based on the limited information there is to determine that, but the stock market is definitely giving investors a warning that all is not well.

With that as background, it can be said that triggering the benefits on a Genworth long term care plan is no picnic.  There is an agreed upon 90 day elimination period during which the insured must show that they are paying for long term care with appropriate invoices and details of care.  After that period, the insurer, Genworth, starts paying.  Getting all of the paperwork done to make this happen was difficult.  It did not help that almost once a month Genworth changed the benefit analyst working on the insured's account.  Finally the policy was up and running, although it was not clear that all past due insured care had been documented well enough for them to cover it.  It did not matter.  The insured and the insured's attorney in fact did not have the time or energy to fret the details.  A payment finally came.

Another came the next month as well after frequent contact with the long term care provider and with Genworth.  It seemed that without the insured's regular involvement, Genworth would have problems.  The benefit analyst once again changed.  There was no payment for the most recent month and filings by the provider have been rejected as unreadable.  That is impossible for details of the invoice, as a Genworth analyst claimed, because they come directly from an online system but it is possible for the detailed written reports by the actual caretakers that are required .  It turns out that the Genworth workers who read the claims can reject an entire batch if  reading just several of a month's worth of reports prove difficult to read.

Also, and this is crucial, Genworth refuses to communicate directly with the agency that is the long term care provider even though they have all phone and fax numbers and names.  They say that they want the insured to stay informed.  So most recently, Genworth rejected a month's worth of claims ending on December 20, sent a letter to the insured dated January 8 which was received Janaury 22(a Genworth agent explained the timing discrepancy by saying they don't have control of their mailroom or the U.S. Postal Service. The insured then needed to contact the provider and Genworth.  To date no claims have been paid since mid-November.  Why can't Genworth send their response to both the insured and the provider as we have repeatedly suggested? Too easy a fix?  Why can't they just fax or call the provider?  Too quick?  Genworth has been given permission to do that.

It is clear from talking to various clerks at Genworth that they are understaffed.  When asked why the benefit analyst assigned changes so frequently, one clerk finally said that "because everyone has so many accounts to work on that they frequently rebalance among analysts to make sure the work is spread around evenly".  When asked why an entire group of claims can be rejected if just a few are illegible, another clerk said that is just up to "the discretion of the team member doing the work and how much other work they have".

There is enough written here.  It feels like this is a class action suit waiting to happen, and maybe that's what the stock market sees, as a suit would surely have the potential to send the company into a liquidity crisis that would lead to bankruptcy.  Maybe that is an extreme comment, maybe Genworth's poor service helps with its liquidity in a way that keeps the financials working, maybe Genworth does better with other clients, but anecdotes do not confirm that, in fact to the contrary.  To be fair, it sounds like the much of the long term care insurance industry is roiled by the same problems.

This is obviously a story that is "to be continued...", but not here.


Blogger John Borden said...

As a follow up to this post, for this policy Genworth, in most its most recent payment, paid less than one tenth of what they owe for the months of December and January. They claim that they cannot read documents that come off of a high speed printer and are faxed to them. They will not provide the address or phone number of their legal department, and will only give the address, no phone number, of their Consumer Affairs department. The clerks say that "it is the same as the legal department". That is obviously not true as they will almost certainly just be babbling bureaucrats trying to placate a client. As a native of Virginia, it is sad to say that this is the former esteemed "Life of Virginia Insurance Company".

4:38 PM  

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