State lawmakers in Wisconsin have passed Senate Bill 581, a bill that would change long-term care insurance (LTCI) sales compensation rules.

The state Assembly and the state Senate approved the bill Tuesday through a fast “suspension calendar” process.

Under current Wisconsin law, LTCI renewal compensation has to be at least 25 percent of the amount paid for first-year compensation. The carrier must pay renewal compensation for at least five renewal years.

An issuer can pay compensation when an agent replaces an LTCI policy only if the first-year sales compensation is no greater than the renewal compensation the agent would get for keeping the old policy in place. If the issuer of the existing policy pays a first-year commission of $100 and a $25 renewal commission, the compensation paid for replacing the policy can be no greater than $25.

Under S.B. 581, renewal compensation would have to be the same as first-year compensation.

A carrier could pay an intermediary to replace an LTCI policy “for which the compensation is not greater than the first-year compensation provided by the replacing insurer for the replacing policy or certificate,” if the replacement met standards spelled out in the bill.

To be able to get the same compensation for replacing an LTCI  policy as for keeping a policy in place, the issuer of the new policy would have to pay reasonable first-year compensation, the new policy would have to be suitable for the applicant, and the new policy would have to “materially improve” the position of the applicant, in terms of matters such as coverage, price, premium stability, or the financial strength ratings of the insurer.

The intermediary replacing the policy would have to put the replacement through an auditable review by the insurer that would be subject to a review by state insurance regulators.

State Sen. Frank Lasee, R-1st Senate District, introduced S.B. 581, and Rep. Kevin Peterson, R-40th Assembly District, introduced A.B. 736, a similar bill, in the Assembly.

Several insurance companies and producer groups supported the bills at hearings. 

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