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Dealing With LTC Insurance Exception Requests: Its A Team Effort

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Houston, Texas

Open communications with the underwriters are essential when producers seek “exceptions” on underwriting decisions regarding submitted long term care insurance applications, said Dirk Weisiger during a panel discussion here.

Held at the Society of Actuaries annual Intercompany LTC Insurance Conference, the panel probed the sometimes touchy subject of exceptions, giving both producer and home office perspectives.

“We need to look at this as a team,” stressed Weisiger, who is president of Summit Resources, a LTC and financial services firm in The Woodlands, Texas.

The “team,” in this sense, includes home office administrators, underwriters, producers and clients, he indicated.

The producer is the communications link on the team and the “mouthpiece,” he said. So, “let us know what you need to find out,” he told the underwriters in the audience. “You cant see these people [for yourselves].”

Concerning clients, Weisiger said many tend to think insurers dont want to give insurance to anyone who has so much as a hangnail. This means agents must focus on “selling the client on the idea of LTC insurance and then guiding the client through the process.”

When obtaining the underwriting information, the producer should question the client thoroughly, said Weisiger. “Ask open-ended questions,” he suggested, to elicit details that will help the underwriter better determine the extent of risk the client presents.

Web-based training on underwriting might help agents learn more about the kind of information they need to obtain, he added. As it is right now, “many agents dont have a clue. They are sales-oriented, not underwriting-oriented. Its the biggest weakness of LTC agents.”

For starters, Weisiger suggested that agents, when evaluating a clients potential risk, should “pretend you own the company. Put yourself in the seat of the company administrator and ask, Would I take that risk?”

Also, “educate the client on the role of the insurance company, and what it takes to pay out thousands of dollars in claims per month.”

Weisiger had some suggestions for the home office, too. It “needs to be willing to take marginal risks. It should present the producer with options on counter offers. And it should view the producer as a necessary partner.”

When a company grants an exception, this sets a precedent, pointed out Barbara Wilk, assistant director-LTC underwriting and claims at Northwestern Mutual, Milwaukee, Wis. “We need to learn from the decision, not forget about it.”

Underwriters also need to guarantee consistency, when presented with the same set of facts on other cases, she said.

What types of new information could bring about a change in the underwriting decision? “Current and new information,” Wilk suggested. Additional details from the client about the impairment would help, too. So would an additional set of blood pressure readings or other medical information, she said.

“Trust your intuition,” Wilk added. “Look at severity (of impairment) and the clients current activity level. Ask, what are they doing? Are they just sitting around, or are they going regularly to the doctorare they activewill they overcome whatever it is they may have?”

If the outlying factors are very good, she said, “they may take your client from decline to accept.”

But, Wilk added, the company should have an “escalation policy” that empowers the underwriter to look at other information and to send the case on for higher level review. The underwriters need a referral system, too, and they should be sure not to request extra information when they are sure the case will be declined anyway, she said.

The insurer needs to manage and analyze its exceptions and to quantify the impact they have on profitability of the business, noted Van Beach, an actuary with Milliman USA in Philadelphia.

This requires being able to capture the exception information, Beach said. “There is not enough to document from the underwriters notes. The information needs to be captured within the systematic structure.”

Being able to pull this information together will enable the insurer to evaluate whether the underwriting decisions were good, bad or otherwise, he said. Then, the company can adjust future actions accordingly.

Doing this will cost money, Beach allowed, “but it will more than pay for itself in the long term.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, March 19, 2004. Copyright 2004 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.