Selling insurance is a balancing act between what you need to say to make the sale and what you must avoid saying to stay out of court, legal experts warned during the SOA Intercompany Long Term Care Insurance Conference.
Agencies and brokers have to provide solid training on the legal risks of selling LTC insurance and remind producers of those risks day in and day out to reduce exposure to lawsuits from disgruntled clients, advised Stephen Serfass, an attorney with Drinker Biddle & Reath LLC, Philadelphia.
For producers, he warned, “You are on the front line. What you say matters.”
One of the touchiest areas in selling LTC insurance is talking about the potential for rate increases, Serfass cautioned. Telling a client her premiums may go up can be a deal killer, but there have been more than a dozen lawsuits over price hikes clients said they never saw coming, he said.
“We’re at the end of a lengthy period of rate increases,” Serfass observed. Even though increases appear to be in declining, it seems unlikely they will end, he warned.
“Any communication you have about potential rate increases is potential fodder for litigation.” he warned. “Be very careful about what you say. Don’t say you don’t know a rate increase is coming if you do.”
If a client asks, “Is this the last increase?” the agent’s response can be decisive.
“Your best answer may be, ‘I don’t know,’” Serfass said. “If an insurer has never imposed a rate increase, there’s nothing wrong with saying so, but you can never say anything to lead the customer to think there never will be an increase.”
The agent can avoid problems in most cases by documenting whatever he or she says, whether it be about rate increases or other sensitive topics, he said.
Serfass urged the audience of producers to keep a list of key policy terms and exclusions and check off boxes as they proceed through each sales presentation. He also suggested they make notes about matters raised with the client, in case the client’s memory needs jostling later.
“If a customer mentions something about his uncle Marty, and you make a note, you can use that to remind the client later of a point you had made at the same time,” Serfass said.
Nancy Morith, president, N.P. Morith Inc., an LTC brokerage in Princeton, N.J., urged producers to keep a thorough worksheet on each case to assure that all legal points were covered, including questions asked to assure the suitability of the insurance sold.
“People don’t always hear what you tell them,” she pointed out.
Some states require such worksheets, noted another panelist, Gail Holubinka, a vice president of MedAmerica Insurance Co., Pittsburgh. “Even if they don’t require it, keep a worksheet anyway,” she urged.
Another source of significant legal difficulties for agents, brokers and carriers alike are e-mails, Serfass added.
“They’re a ticking time bomb for the insurance industry,” he said. “We say things in an e-mail we’d never say in a letter. It gives us in the legal profession high anxiety.”
He cited one case involving a baby seriously harmed in a birthing center. The carrier’s defense was demolished when the litigant’s lawyer discovered an internal memo in which an executive wrote to another, “We always try these bad baby cases.”
“You’d be amazed at the things people talk about in e-mail,” Serfass said. “Read what you send out before you send it. Picture a plaintiff’s lawyer asking you what you meant by what you wrote.”
Another potential legal difficulty concerned privacy protections under the Health Insurance Portability and Accountability Act and the Gramm-Leach-Bliley Act. The acts include provisions designed to protect the confidentiality of individuals’ health care information.
If the agent discloses the information to a third party, that can have serious repercussions, unless there is a legitimate business reason to do so, such as to resolve a claim, he said.
Kristin Heine, another associate with Drinker Biddle, noted state regulations are also a cause for care by LTC agents, particularly in the area of suitability. State regulators take it seriously, and the courts have backed them up, she said.
She recounted one agent whose license was suspended for selling excessive LTC insurance to a client who already had purchased four supplement Medicare and two nursing home policies from other agents.
Holubinka of MedAmerica added what the agent says can create a liability for the carrier. “We want to see what you’re doing,” she said. “It creates a risk.”
Oral representatives at the time of sale can override the written terms of a policy, she pointed out. “Which is why training and supervision are important,” Holubinka added.
Heine added a final precaution for carriers: “Be careful in hiring. Do background checks. And keep the lines of communications to agents open. These are complicated products that can really have an impact on people’s lives.”