It should come as no surprise that America’s population is aging — 40 million Americans are currently 65 or older, and by 2020, that number will exceed 53 million. By 2030, one in every five people will be older than 65. To date, more than 9 million Americans have purchased long term care insurance policies, and proper coverage is crucial. Nonetheless, the general lack of knowledge about long term care and its consequences can leave many Americans confused, frustrated, and ultimately unprepared for their future needs.
Too many Americans are under the false impression that federal or state programs will help pay the lion’s share of their long term care health needs. This is an improbable proposition with the spiraling cost of health care and the sheer numbers of senior Americans; our government just can’t print enough money.
As a trusted agent, you are an important resource for your clients and their families as they navigate these troubled waters, trying to find the right coverage from the right company.
Keep up with new guidelines
Whether you are new to selling LTCI or a seasoned veteran, you need to be vigilant about the rules and regulations, as well as guidelines that have been established regarding the sale and solicitation of LTCI. The National Association of Insurance Commissioners has established model acts and regulations for LTCI. Most states have enacted similar requirements that regulate the purchase and sale of LTCI policies and agents’ behavior during the solicitation and application process.
Inform your clients
One of the most important requirements is that you provide the prospective client with a “Shopper’s Guide” and a description of the policy’s benefits and limitations (i.e., outline of coverage) early in the sales process. It is important for the prospective client to compare the features, advantages, and benefits of several different companies so they know what the market offers. In this climate of premium rate increases, it’s also a good idea to have those increases documented, as well as the reasons behind them.
Companies must also file annual reports of the number of claims denied and information on policy replacements and terminations. Sales practices such as “twisting” — knowingly making misleading or incomplete comparisons of policies — are prohibited, as are high-pressure sales tactics.
Follow codes of honesty and good faith
Agents are also held to a high code of honesty and good faith regarding the solicitation and sale of LTCI. Some states have statutes that directly speak to your actions: “During the offer and sale of a policy previous to the purchase is relevant to any action alleging a breach of the duty of honesty, and a duty of good faith and fair dealing.”
Insurers have also been directed in dealing with consumers. One statute states that they must “develop and use suitability standards to determine whether the purchase or replacement of long term care insurance is appropriate for the needs of the applicant.” In this regard, agents have to make “reasonable efforts to obtain the [necessary] information” in order to determine if the applicant meets the suitability standards by asking applicants to complete a long term care personal worksheet. You need to explain thoroughly to your client that in completing the personal worksheet, you are protecting them and that their answers will help you find the policy that will be best suited to their needs and that the answers they provide to you and the insurer are protected under HIPPA.
Making sure you are working within the new regulations and statutes is a must. Doing so will surely provide you with continued prosperity and good standing in the community you serve.
Frank N. Darras is the founding partner at Darras Law. He can be reached at [email protected] or 800-458-4577.