As long term care insurance (LTCI) evolves to better meet consumer needs, so does our learning curve for underwriting it. And as the product becomes more sophisticated, so do the product features, pricing, and underwriting processes. Little did we know 10 years ago the impact that cognitive impairments would have on the industry, or that clients would keep their contracts, forcing companies to use a lapse ratio of less than 1 percent, raising the odds that rates on older contracts will rise.
Unlike life insurance, with over 100 years of history and tradition, long term care insurance is relatively young. In fact, most insurers are just starting to enter the first big pocket of claims, and it isn't what they expected. Claims are larger, they're longer, and they're for health conditions that were barely understood when the policy was originally issued. While underwriting for life insurance is fairly standard from one company to the next, long term care insurers have different experiences, resulting in different in underwriting practices. Advisors who expect long term care underwriting results to be similar to life insurance results often experience something completely different, sometimes leading to their frustration with the product. However, advisors can help overcome underwriting obstacles by doing some preliminary underwriting in the field.
Following are six steps to help increase your odds of LTCI underwriting success.
Step #1: Talk to your clients about their medical histories before you propose LTC insurance as a planning solution. Your carrier likely will provide a pre-screen checklist to help with this discussion:
Here's a sample script: "Mr./Mrs. [insert client name], there are several options when it comes to preparing for a time when you may need long term health care assistance. Before I can propose a solution, please tell me a little about your medical history, any conditions you may have, medications you are taking, and recent hospitalizations. This will help me determine the best method and appropriate costs to ensure your and your family's peace of mind."
Step #2: Use your carrier's field underwriting guide to understand how medical conditions may be viewed by the underwriters. The guide likely will provide height/weight/build charts, medications, and most medical conditions along with the possible underwriting action associated with them. Having this information will help you illustrate the appropriate underwriting class or determine whether other options are more suitable for your client.
