Producers Reluctant To Switch Clients To Newer LTC Policies

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Todays buyers of long term care insurance policies are enjoying many product features that were not available on policies sold even a few years ago. But theres a downside to that: Many clients have older policies with benefit limitations that newer policies often dont have.

For instance, many agents point out, some policies sold in the 1990s specify that a beneficiary must be confined to a hospital for a certain period before they will pay for nursing home care. Others have absolutely no provision for home health care. And many older policies lack inflation protection.

So, should a producer ever try to transfer a client to a newer policy with more valuable benefits?

The answer, almost always, is no, according to experts.

They point out that a new policy costs significantly more than an existing policy, even factoring in the enhanced benefits. If a client has not significantly improved his financial situation, then he is probably better off sticking with the old policy, as limited as it may be, they note.

William C. Gelberg, principal, William C. Gelberg Agency, Delray Beach, Fla., says he never considers switching a client unless the only other option is to drop the policy altogether because it is too costly. On such occasions, he may suggest that the client switch to a bare-bones policy that provides at least some coverage, even if it has fewer benefits than an existing policy.

That situation could arise, for instance, when a company significantly increases the cost to customers as has happened in Florida, Gelberg argues. “In that case, I might consider transferring them to a policy with fewer benefits but only if they are in good health and acceptable to another company.”

William Thrash, an agent with AXA Advisors Equitable in Anniston, Ala., calls the price-benefits quandary “one of those Catch-22 things” for LTC producers.

If he finds someone with an old nursing home contract, then Thrash says he compares its benefits with a richer policy, without actually making a recommendation. “If you do your comparison and youre open with the information, then their decision is, Do I keep the nursing home policy, or do I go to a policy thats more comprehensive?”

Thrash thinks too many producers overemphasize the value of enhanced benefits. “They make the client think they have something thats not worthwhile,” he says. “But if they have a nursing home policy and thats whats affordable to them, at least theyll have some benefit there if they need it.”

Thrashs point: Whats best for the client will not necessarily produce a commission for the agent.

“But the way I think of it is, if its the proper decision for the client, its got to be good for me, whether I make the sale or not,” he says.

“I almost never tell a client a policy they have should be replaced,” adds Kathy Kirkland, director of LTC sales for Capitas Financial, Jacksonville, Fla.

“There are a few exceptions, however,” she says, citing 3:

If a policy is less than a year old, and the producer can get a better deal for the person without losing benefits.

The client has got in a situation where he cant afford to pay the premiums any longer but might afford another policy with fewer benefits.

The client is looking to supplement a policy, such as by adding home health care.

But, Thrash cautions, enhanced benefits arent always in the best interests of the client. “I feel like just because something has changed, that doesnt mean you have to get it,” he says. “It doesnt mean what you have is bad.”

This article is reprinted from the Aug. 16, 2004, edition of LTC e-Wire, an online publication of National Underwriter Life & Health.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 3, 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.