Understanding Long Term Care Insurance Underwriting Betty Doll, MBA, CLTC Doll

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UnderstandingLong Term Care Insurance
UnderwritingBetty Doll, MBA, CLTCDoll
Associates Long Term Care Insurance
Serviceswww.BettyDollLTC.com

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• Regardless of the type of insurance being
  discussed, insurance underwriting is essentially
  calculating the risks.

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Morbidity vs. Mortality

• Mortality Measures the risk that a person is
  going to die earlier than the average life
  expectancy for someone of that age
• Most important risk when writing life insurance

• Morbidity Measures the risk that a person will
  live with a debilitating condition that can
  impact their ability to function independently
• Most important risk to consider when writing long
  term care insurance

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LTCi Underwriting

• Evaluates the risk that the applicant will need
  help with the activities of daily living or
  develop a significant cognitive impairment
  requiring constant supervision
• Less actuarial data to rely on than is found for
  life insurance
• Lapse ratios are much lower for LTCi than for
  life insurance

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Insurability

• Each carrier has a list of conditions that are
  uninsurablethese include the presence of chronic
  conditions and or the use of supportive equipment
  such as walker, wheelchair, or use of oxygen.
• Most carriers also publish a list of medications
  the use of which results in the applicant being
  uninsurable. It is important to determine why
  each medication is being usedoccasionally the
  med is being used for a reason other than its
  typical usage and the person may be insurable.

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Uninsurable Conditions

• The presence of certain conditions will routinely
  rule out being able to obtain coverage.
  Conditions include Alzheimers or other
  dementia, ALS, MS, Parkinsons disease, active
  cancer, AIDS
• Applications for multi-life coverage may result
  in some simplified underwriting but most will
  still rule out the conditions listed above
• True group/guaranteed issue products are
  available from a few carriers and have
  participation requirements to get guaranteed issue

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The Role of the Underwriter

• Underwriters look for information in the
  application and in the medical records to help
  them determine the risks in each individual case.

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Underwriting Concerns

• Cognitive impairment
• ADL impairment
• Musculoskeletal issues
• Co-morbid conditions
• Multiple medications
• Current or recent physical therapy
• Independence factors

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Cognitive Impairment

• Cognition includes basic processes of perception,
  attention, memory, reasoning, decision-making and
  problem-solving
• Problems with cognitive impairment can result in
  misuse of prescription meds, car accident,
  squandering life savings
• Disease, meds and head injuries can affect
  cognitive abilities
• Cognitive impairment is often progressive

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ADLs

• The lack of ability to perform ADLs is one of
  the triggers for tax qualified long term care
  policies
• ADLs include bathing, dressing, continence,
  toileting, eating, and transferring

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Instrumental Activities of Daily Living

• IADLs are activities that support independent
  living. The need for assistance only with IADLs
  will not trigger the benefits of the LTC policy
• The existing need for assistance with IADLs will
  generally result in the person being uninsurable
• IADLs may include Meal preparation, housework,
  laundry, managing money, taking meds, driving

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Musculoskeletal Issues

• Osteoporosis is found in men and women
• Osteoporosis increases the risk of fractures from
  falls which is a leading cause of the need for
  long term care services
• Severe arthritis can also limit the ability to
  live independently

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Co-Morbid Conditions

• Co-morbid conditions are those whose presence
  makes other conditions more significant
• Examples Diabetes with Obesity, Asthma with
  Smoking
• Multiple Medications May cause adverse side
  effects

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Physical Therapy

• Current (or very recent) physical therapy
  treatment is usually a red flag for underwriters.
  They will want to know the outcome of the
  treatment before accepting an application. They
  cannot assess risk while treatment is ongoing or
  if condition is not yet stable.

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Independence Factors

• The applicants current level of independence is
  a good predictor of their ongoing level of
  independence.
• Many carriers ask questions related to hobbies
  and involvement in volunteer work as an indicator
  of current activity level.
• It is the producers job to paint a picture of
  the client for the carrier.

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Immobility

• Difficulty with movement can be a result of many
  different conditions including orthopedic
  conditions (osteoarthritis or fractures),
  neurological conditions (such as stroke), or
  psychiatric conditions (severe depression)

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Instability

• Instability may be caused by vertigo (dizziness),
  musculoskeletal conditions (e.g. arthritis), or
  by alcohol, drugs, or side effects of drugs
• Instability may result in falls and/or injuries
  which can then lead to a need for care

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Incontinence

• Incontinence is a lack of bowel and/or bladder
  control. This may be caused by conditions such
  as multiple scleroses, stroke, benign prostatic
  hypertrophy (BPH), drug effects or urinary tract
  problems.
• If incontinence is an issue for an applicant,
  make sure to spell out the reason for this in
  detail on the application

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Iatrogenic drug reactions

• Iatrogenic Inadvertently induced in a patient
  by a physician's activity, manner, or therapy
• Iatrogenic drug reactions are common in the
  elderly. Studies show that the average geriatric
  patient takes eight different meds daily. Thus
  there is significant risk of drug interactions,
  toxicity, and dosage errors. Any of these may
  adversely affect intellectual capacity and/or
  physical abilities.

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Screening for Cognitive Impairment

• Because a cognitive impairment is potential more
  costly than other health problems, most carriers
  use some kind of memory screening questions in
  the phone or in-person interview they conduct
  with the applicant. Face-to-face interviews are
  routinely conducted with applicants over age 70
  and may be conducted with younger applicants.

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Rate Classes

• Most carriers offer at least two rate classes
  (Preferred and Standard) but some offer up to
  five classes.
• Agents should utilize available resources
  including underwriting guides and underwriting
  hotlines to attempt to provide and accurate quote
  for coverageits best to be conservative in your
  ratings. Carriers will issue the policy based on
  medical data regardless of the rating you
  indicated on the application or quoted to the
  prospect.

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Pre-Underwriting Your Client

• It is important to get adequate information from
  the prospect to allow you to determine
  insurability and likely rate classification
• It is helpful to obtain the information before
  meeting with the client if at all possibleyou
  can provide a health questionnaire to be returned
  to you or you can obtain the information via the
  phone

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Pre-underwriting Questions

• Date of Birth
• Height/weight at last doctor visit
• Medications prescribed (frequency, dosage).
  Usually need a period of stability on meds
• Hospitalizations in past 10 years
• Tobacco usage in past 5 years
• Other health issues in their medical history
• Procedures/surgeries that have been recommended
  but not completed
• Current P.T.?

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Helpful Hints

• Information that is important but often missed
  relates to height/weight issues, the use of
  anti-depressants, current physical therapy
  treatment, and/or the use of a CPAP machine.
  These may or may not affect overall insurability
  but they will affect the rate class assigned and
  your quote should reflect that.

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Height/Weight Issues

• Hint It is easier to ask height and weight over
  the phone rather than when the person is in front
  of you.
• Being under- weight can be an issue as can being
  overweight
• Carriers have different guidelines for
  insurability and rate class. You can find the
  charts in the underwriting guides of each carrier.

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Asking Health Questions

• You will become more comfortable asking health
  questionsjust as you became comfortable asking
  financial questions
• Start by saying tell me a little about your
  health and then move on to more specific
  questions. Do NOT settle for were in good
  health.
• Some conditions require more extensive
  questioninge.g. the staging of cancer, date of
  last treatment, A1C scores for diabetes, any
  complications related to the condition, how long
  ago was the diagnosis made
• Underwriting hotlines are helpful sources for
  information on conditions and direction on what
  additional information to request

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Career Agents

• Your carrier publishes a field underwriting guide
  should be available in hardcopy or as a
  download.
• Underwriting guide provides info on different
  medical conditions and how they are rated. It
  also contains height/weight chart.
• The people on the underwriting hotline are your
  friends! Utilize them.

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Independent Agents/Brokers

• Obtain the underwriting guides for each carrier
  you represent
• There are software programs that allow you to
  enter an impairment or combination of impairments
  and check the requirements of selected carriers
  simultaneously
• Being familiar with the various underwriting
  requirements can help you chose the best carrier
  for your client

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Completing the Application

• Remember to watch for co-morbid conditions
• Dont hesitate to call the underwriting staff
  with pre-underwriting questions
• On the app, paint a picture of the applicants
  health situationthey may be much healthier than
  they appear on paper. Help the underwriter see
  the whole picture.

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Preparing Your Client for the Underwriting Process

• Carriers have different underwriting processes in
  general and requirements may vary based on the
  age of the applicantmany have brochures
  available to explain their process
• Older applicants will go through a more rigorous
  underwriting process
• Explain to the applicant the difference between
  underwriting for morbidity vs. mortality

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Underwriting Tools

• Application
• Phone History Interview (PHI)
• Face-to-face interview (FTF)
• Medical Records (APS-Attending Physicians
  Statement)
• Para-medical exam

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Underwriting Decisions

• Approved
• Coverage is approved.
• The rating may be different (less favorable or
  more favorable) based on the information received
  during the underwriting process.
• Declined
• Approved with Modifications
• Reconsideration offered

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The Appeals Process

• In some situations a declined application can be
  appealed.
• The applicant or the physician may have
  additional information that will affect the
  decision in a positive manner.
• Appropriate documentation (usually test results
  or a letter from the physician) will need to be
  submitted and reviewed by the underwriters.
• Changes in underwriting will be made if
  appropriate. Note that this does not happen
  often and should be attempted only if you truly
  have additional supporting documentation.
• Process can be frustrating to the applicant and
  to the producer.

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Reminders

• Remember that underwriting for LTC is about
  morbidity rather than mortality. Most physicians
  do not understand thismay have told the
  applicant/patient that you could live forever
  with this condition. That is the type of
  condition that may not affect mortality but could
  increase the likelihood of a long term care need.
  

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Summary

• The agent must get comfortable with field
  underwriting
• Tools available include written underwriting
  guides, access to underwriting staff, possible
  resources from your General Agent
• Do NOT submit apps that do not meet underwriting
  guidelinesit is a waste of your time, the
  applicants time, the underwriters time, and the
  carriers resources.

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• Presented by Betty Doll, MBA, CLTC
• Doll Associates Long Term Care Insurance
  Services
• Asheville, NC
• www.BettyDollLTC.com
• Broker, Trainer, Consultant
• Making the discussion of long term care planning
  easy, enlightening, and enjoyable.