Today, I am having a conference call with two Genworth (GNW) executives to discuss some of the questions I raised in my prior post about GNW’s large rate increase here in Texas and across the nation. In preparation, GNW has generously supplied me with several policy forms (specimen policies) affected by the rate action.
Based upon my first review of the nearly 100 pages of material, it appears that there is no language in any of the forms that addresses how accrued gains from the inflation-protection riders are to be treated if the inflation-protection riders are either down-graded (e.g. changed from 5% compound inflation protection to 3% compound) or terminated altogether. To put it more simply: there is a complete vacuum of contractual clarity on this matter.
However, Genworth did supply me with a producer bulletin issued in 2007 addressing changes in how it would deal with the aforementioned accrued benefits. It may be that this bulletin is GNW’s only definitive statement on the impact of this critical policy owner decision. I find that slightly disturbing since the bulletin was issued only to agents and with the express warning that it was . . .
FOR PRODUCER USE ONLY. NOT TO BE USED WITH THE PUBLIC.
Perhaps I will discover during the course of the phone call that a similar notice was issued to policy owners. I hope so.
I also find it alarming that any insurance company would have that much power: the power to both unilaterally impose a huge rate increase and to define the impact upon the consumer for taking a predictable action precipitated by that very rate increase. From the vantage point of a consumer, this seems a bit like playing chess against an opponent who gets two moves for every one of yours.
Fortunately, based on the well-established doctrine of Contra Proferentem, I do not think this unfair “check-mate” will hold up in court when it is (inevitably) challenged. When policy provisions are unclear, undefined, or ambiguous, the courts almost always rule against the author of the contract, which in this case is GNW. We shall see.
A Very Brief Addendum for a Very Brief Phone Call
The conference call took place several days later than planned, on May 31, 2016. It was delayed because I was in a bad car accident shortly before the call was scheduled to occur. The Genworth executives were very helpful in rescheduling our call. The phone call was actually attended by three executives, not two as I’d originally reported and anticipated. It lasted less than five minutes. I joked at the outset of the call that I felt very important since so many people were on the call. No one laughed. It was awkward.
My specific questions pertained to the inflation adjustment rider mentioned above. I learned that there was, indeed, no language in the policies addressing how accrued gains from the inflation-protection rider would be treated in the event of that rider’s cancellation or reduction. I asked about whether notices, similar to the bulletin issued in 2007 for producers only (mentioned above), had been provided to policy holders. One of the presenters indicated that he wasn’t aware of any such policyholder notification.
I invited the Genworth executives on the phone call to comment on my writing about Genworth. They declined to comment and indicated that their answers would be limited to only what would help me with my actual clients. I was tongue-tied at that time and hastened the end of the call. But when I followed up later via e-mail with a question I felt would help me serve my clients, the information I requested was denied.
A Closing Observation & Image
I think life insurance executives would greatly prefer for agents to focus on selling and otherwise stay silent. I think life insurance executives believe they are above the scrutiny of the people who sell their products. For that matter, I think they feel they are above the scrutiny of those who buy them.
Practically speaking, they are right. There is precious little I can do, precious little any consumer can do, to hold a life insurance company accountable. There is precious little we can do to explore the integrity of the promises we are asked to sell and buy.
I’ll leave you with a visual image for what it felt like to be on the conference call with the Genworth executive squadron.
And isn’t it a shame? I didn’t do anything to put Genworth in this situation. If anything, shouldn’t it be the other way around?
© Michael C. Burton, 2016 and all years.