Is Genworth Life Screwing Loyal Customers?

Hopefully that got your attention if you have a Genworth Life or First Colony “Colony series” term life insurance policy. The company had to make a business decision about their low cost super competitive term conversion product, the Genguard no lapse universal life. They say they’re losing money on it so they have announced a rate increase on that product effective September 3. Applications for conversion have to be in the home office no later than September 2. So, is Genworth screwing loyal customers by increasing the rate on this product? It’s a huge rate increase. This isn’t the 5%-10% garden variety rate increase. We are talking about a rate increase that would simply make you decide it’s not worth it to convert.

An example they gave in their release to agents was on a 55 year old male who was originally approved at preferred best on their Colony term policy of $1,000,000. The original approval is important because a converted policy will have the original rate class even if you’ve had major health changes. So even if this guy has diabetes, has had two heart attacks and colon cancer he is still preferred best for conversion purposes even though he wouldn’t be able to buy a new life insurance policy. If he converts that $1 million before the rate increase it would cost him $12,755 annually to guarantee a level premium and death benefit to age 121. If he thinks about it until after September 2 the rate increase will go into affect and his new premium would be $29,481. Or he can hope he outlives his term life insurance policy.

Back to the question about whether Genworth is screwing loyal customers. I don’t think any case can be made for that. If they are really losing money on the product they owe it to their shareholders to get the product out of their portfolio asap. The fact that they are giving any warning to agents to contact clients is far more than other companies have done and more than fair. No where in their conversion or exchange language does it say that they will give a warning before they change products or raise rates. The rates on the term policy are guaranteed level for the Colony term product length purchased. The rates on the converted Genguard policy are guaranteed level to age 121. But the deadline is there and it is real and it can either be a lower guaranteed rate or a much higher one. I think Genworth took the honorable high road in this change. It’s a shame it’s got to happen but it’s good that those who want and know about this change can take advantage of it.

I do have some questions about how highly paid actuaries could actually convince company management and state commissions that a product that was under priced by more than half should have been released for sale in the first place. It doesn’t seem plausible, but I suspect their new actuaries may not make the same mistake.

I really hate it when someone presents me a financial idea with such a short time to act, but let’s put that in context. If your financial adviser called and recommended you buy a certain stock this morning, are you going to think about it for a month? If that same person called and advised you to sell a certain stock right now, would you wait a day to see what really happens? It’s all about making and saving money. I would be the last person to say that every Colony term policy owner out there should jump on this and convert, although since you can convert as little as $50,000, it make a very inexpensive final expense policy. But if you have a permanent need, whether that is estate taxes, inheritance gifts or final expenses, this is a golden opportunity. It is absolutely worth accelerating at least your consideration of when to take the action you know you will eventually take.

Bottom line. Again, life insurance conversion may not be a need for everyone with a Colony Term product from First Colony or Genworth Life and Annuity, but for those who do have that need, even a small final expense need, it doesn’t get any better than it is until September 2. Remember. Applications have to be in the home office by then. If you have questions or need quotes, call or email me directly asap. My name is Ed Hinerman. Let’s talk.