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.
Step #3: Call your LTCI underwriting support team to discuss the client’s medical conditions and to identify possible underwriting outcomes. Remember to provide details such as how long the medical condition has lasted, when it was first diagnosed, medications and dosages, and any other relevant information.
Step #4: Always discuss with your client the possibility of a decline or lower rating, and have this talk at the time the application is taken. This way there are no surprises on the back end, and the client will anticipate the possibility of paying a higher premium if the rating is decreased. If you are unsure about a client’s condition or you feel the information the client is providing may not represent the whole picture, it is recommended you illustrate and apply for a lower rating (standard instead of preferred). A rating increase is always well received.
Step #5: Notify your client up front of the underwriting steps, such as gathering the medical records and conducting an LTC exam or cognitive assessment. Not only will your clients feel more comfortable with the process if they know ahead of time what it entails, they will feel less intimidated at the time of the exam.
Step #6: If the client has a medical condition that will not be considered, you probably shouldn’t submit the application. Doing so could damage your relationship with the client and may eliminate the opportunity for your client to submit an application with other companies. Because of the cost of gathering the medical records and performing the necessary exams to eliminate insurer risk, it is fast becoming an industry practice to not review previously declined applications.
Good field underwriting benefits everyone involved. The client has more realistic expectations of the underwriting process, the carrier does not have to decline the application, and the advisor maintains strong relationships with both the client and the underwriter while building a solid book of LTCI business.
Kimberly Anderson, CLTC, LTCP, is the long term care insurance product manager for Minnesota Life, a subsidiary of Securian Financial Group Inc. She can be reached at firstname.lastname@example.org