In October 2011, Glenn Neasham of Lakeport, Calif., was convicted of felony theft from an elder for selling an Allianz indexed annuity to 83-year-old Fran Schuber. The issue? Schuber had dementia; Neasham said he didn't know it. He lost his license and his home, now has a public defender after running out of money and is out on bail pending an appeal.
Advisors who do not sell insurance may think this cautionary tale does not apply to them. However, dementia in the elderly is likely to affect advisors even if they merely advise them about insurance coverage as part of an overall plan.
A recent conversation with Dr. Stephen Holland, chief medical officer of Univita Health, revealed several reasons why advisors should become more attuned to older clients' mental acuity. In a presentation before the Life Insurance Conference in April, Holland and Peggy Hauser, senior vice president and chief actuary at Univita, noted that the correlation between dementia and life expectancy is both measurable and substantial, and life insurers are including dementia screening in their underwriting for elderly clients.
Insurers and reinsurers are interested because failure to screen for dementia could put them in an elevated risk pool by accepting too many clients with the disorder. According to Holland, Alzheimer's disease is present in almost half the population over 85. "Between the ages of 70 and 79," he said, the rate "can be as high as 15%. For the pre-dementia state, include another 20% to 30% of individuals."
Said Holland, "A 65-year-old woman has maybe 15 years or so of life expectancy. But a 65-year-old woman with dementia will have only 7.5 years." Men with dementia have 20%–25% shorter survival times than women with dementia.
According to a 2005 REVEAL study, people who test for Alzheimer's and are given information about their likelihood to get the disease change their behavior. Part of that change is the purchase of additional insurance: both long-term care (LTC) policies and higher life coverage.
