“A cursory look at long term care carriers doesnt work anymore.”
That statement from a LTC specialist summarizes the views of many LTC insurance producers and even some LTC carriers. Several talked candidly with National Underwriter about what producers can do to choose a LTC carrier with whom to contract or to place unique cases.
The short-form answer is: Do your due diligence.
“Producers need to contract with and place business with LTC companies that are as solid as a rock,” says Neville Verster, the producer who made the comment above. He is president of LTC Insurance Solutions L.L.C., in Fountain Hills, Ariz.
“What we dont want,” he stresses, “is to place clients with companies that will introduce 40% to 50% rate increases within, say, four years.”
Therefore, before ever contracting with a company, producers should ask some probing questions of the companys senior management and the LTC product actuary, he says. For instance, find out what the companys strategy is on rate increases and also its past history on rates and claims.
“In addition, look at the companys assets and surplus and at its annual report, as well as its ratings. Ask yourself, is this company over-extended? Would you buy or sell its stock if you were an investor?”
In other words, give the company careful scrutiny, Verster advises.
A lot of producers are thinking that way today, confirms Christopher Rogers, general director of LTC market development at John Hancock in Boston. In the last year, he says, Hancock has seen “a significant increase” in questions from producers. They ask about things like company ratings, brand and rate stability.
One factor fueling this trend is news that some LTC carriers have instituted rate increases on in-force blocks of business, he says.
Another factor is consumer demand. Potential buyers are more educated about LTC insurance than in the past, Rogers explains, and they are asking their sales reps informed questions. So the reps call the carrier sales desks to get accurate answers.
Still, another factor is the growing number of financial reps who are coming into LTC sales from other financial sectors. They call to learn more about LTC, Rogers indicates. At Hancock, he notes, many of the callers now include planners and financial consultants, in addition to LTC specialists. Others are stockbrokers or managers of stockbrokerage firms.
All these people are asking not only about ratings and company stability, he says. They are also asking about product features. “For instance, today many inquire about whether a product has home care or family needs benefits.”
He suggests the inquiries on this are increasing because the features are becoming more popular with consumers.
Running a comparative analysis of product features really helps, says Michael Middleton, a LTC specialist with MassMutual Financial Group in the Overland Park, Kan., office. Although he is a career agent with MassMutual, he says he also represents other companies when the need arises. This means he sometimes has to select from products and companies with which he does not have everyday familiarity.
How does he choose? He says he runs software that lets him sift for product and company comparisons. “This helps me consider the competitiveness of the products, and demonstrate credibility and objectivity, too.”
Middleton uses other software, as well. One product screens LTC companies by ratings, length of time in business, historical data and other factors, even the Comdex rating score. (The Comdex score is a numeric composite average of individual scores from top-rating agencies.)
Middleton filters all this against his own personal criteria. For instance, “Comdex scores are 100 or lower, and I prefer to work with companies at 90 or above.” Also, he says he prefers a company that has been in business 10 years or more, has excellent individual ratings and is a multibillion-dollar company or corporation.
“Diversified companies of significant size” are tops on his list. Such insurers will be better positioned to pay claims in the future, he explains, as compared to, say, a small company. “Thats not a guarantee, of course, and bigger is not always better. But its something the agent can use as a measure” when selecting companies.
Staying power is a big factor. Dominic Mogavero, a LTC specialist at Strategic Financial Partners in Waltham, Mass., puts it this way: “I look for the 800-pound gorilla. I want companies that have been in the business a long time, have tons of money, are committed to the product line and offer LTC plans that are comprehensive.”
Such companies will likely understand LTC underwriting and price so they wont have to keep on increasing rates, he explains.
If a company is a LTC newcomer or has less than five to seven years LTC experience, he says, “Id look to see if it has many years of general insurance experience. And, Id prefer that the company have experience in disability income insurance–because this suggests it would be more likely to understand disability-related medical claims.”
Mogavero also looks for top financial ratings, generally A+ and higher. “Thats not to degrade B-rated companies,” he says, “but a lot of clients tell me they cant take the risk of being with a B-rated company.”
Many clients today are amazingly savvy, Mogavero adds. “Some even say they want to know the Comdex rating.”
Agents have a responsibility to meet the clients requirements and needs, he says.
Financial assessments are very important, agrees William H. Lee III, a LTC producer at Iberville Banks, Prairieville, La. But since agents have neither the time nor expertise to do a detailed analysis of company financials as they relate to LTC insurance, he suggests taking a broad approach. “Look for a company with a good name, a good reputation, good financials and good ratings.”
But first do a needs analysis of the client, he adds. Then look for products from three or four companies.
Like the other agents who were interviewed, he prefers using companies that have been around a long time. For newer LTC companies, he prefers those that hire LTC professionals having at least 10 to 12 years experience.
Like many agents, Lee is concerned about the possibility of the client having a big rate increase within a few years of policy issue. “That scares me,” he says. Therefore, he seeks out companies that dont offer the cheapest rates in town, fearing such would lead to huge rate increases later on.
But Lee fully expects there will be smaller increases of 10% to 20% over the 10 to 30 years most people own their LTC policies. He says he tells clients that upfront. If they say they couldnt afford any rate increase at all, he says he suggests lowering the benefit a little or making some other change to the plan.
But if a client insists on a low-ball rate, he adds, “I tell them to go somewhere else. I absolutely wont sell to a company that has premiums that are too cheap.”
Many LTC carriers promote their ratings because LTC insurance is such a long-duration product, points out Pamela Delaney, vice president-LTC insurance in the Hartford, Conn., office of MassMutual. Agents and customers want to be sure the company can weather the years in between purchase and claim, she explains.
The concern becomes a front-burner issue during periods of recession, such as now, she adds. But looking for companies with good products as well as good ratings is even more important, Delaney contends. “You cant have one without the other.”
Further, “a good rating is not carte blanche to offer a poor product,” she says. She suggests agents examine whether the product design is flexible and whether the product has unique features, shared benefits, key elimination periods and a host of other elements. “Think about what is important to the client and ask, does the carrier have it?”
Rates should be competitive, though they may vary as much as 15% to 25%, even with insurers rated AA or higher, she adds. “Be wary, though, if a company offers the lowest rate and highest commission.”
Another guidepost from Delaney is to ask the company how it is positioning its LTC product–the sales strategy, the target market and so on. “LTC insurance is not yet in a mature product cycle,” she explains, “so its a constantly changing landscape.”
In addition, “ask the company how it can help you sell the product,” she suggests. Let the carrier know what your own market is, she adds, and see how the companys product can help create differentiation in that market.
Word-of-mouth information from other producers can help, too, Delaney says. But be sure to talk with someone who has a similar background, business model and target market, she advises.
It helps to do ones own due diligence first, before talking to other producers, she adds. “Then, you can talk more specifically.” It also helps to consult multiple sources, not just one producer.
Checking claims history is a good idea, too, contends Jesse Slome, president of American Association for Long Term Care insurance and also of LTC Sales Creators, Westlake Village, Calif. This will help producers review the actual LTC operation, he says, citing the companys ability to pay claims, how many claims they pay, what claims they pay and similar factors.
This check should be in addition to checking the ratings, not in place of it, Slome says.
As more and more LTC policies age and more policyowners start receiving LTC, claims-paying ability will become increasingly important, he predicts. “If a company develops a reputation for paying claims efficiently and with good customer service, that will spread good will. If not, complaints could end up in the media or litigation.”
LTC companies do pay claims, Slome adds. He points to results of a study his firm did of cumulative LTC claims reported to National Association of Insurance Commissioners. “For the 12-months ending Dec. 31, 2002, the nations LTC insurers paid out a cumulative sum of $1 billion to tens of thousands of Americans,” he says.
Is it worth the producers time to comb through so much information about LTC carriers?
Middleton, the Kansas agent, thinks so. Consumers today have a “good healthy skepticism,” he explains. “They know there can be corporate instability. So they want sellers to back up their recommendations, not just say trust me.”
This is especially so since people buy LTC insurance with the intention of keeping it the rest of their lives, he adds. “Rarely do people say to me, this is not enough information.”
Definitely, concludes Rogers, the Hancock executive, “the need to know about LTC and LTC companies is growing.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 20, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.