Industry argues for recourse after 2-year LTC contestability period
When is fraud really fraud and should a long term care carrier have recourse after a two-year period of contestability?
These two questions continue to generate considerable discussion as regulators at the National Association of Insurance Commissioners work to update the Long Term Care Insurance Model Act.
Specifically, post-claims underwriting and the recission of long term care contracts after a contestability period ends are practices that regulators and consumer advocates are challenging as being potentially abusive. Insurers, on the other hand, say they provide them with protection from those who fail to divulge the state of their health accurately at a contract’s issue.
The discussion at the Senior Issues Task Force during the NAIC’s summer meeting here centered on the model’s Section 7 Incontestability period. In particular, insurers are concerned about the elimination of a provision that addresses the right of an insurer to contest a policy or certificate if the insured “knowingly and intentionally misrepresented relevant facts relating to the insured’s health.” The draft now simply reads: “After a policy or certificate has been in force for two years it is not contestable.”
“Up until this draft, we had deterrence language in there,” said Victoria Femea, senior counsel-litigation, with the American Council of Life Insurers, Washington.
Wisconsin Insurance Commissioner Jorge Gomez asked if incontestability should be kept indefinitely to which Femea responded that “fraud is fraud.”
But Gomez asked for specific examples to be brought to the task force.