Liston to insurance advisors: Be detectives

Careful information gathering, basic medical research, an effective interviewing technique and thorough preparation for a follow-up expedite the long term care insurance (LTC) underwriting process.

Denise Liston, vice-president of underwriting products and services at Life Plans Inc., which provides insurers with risk management programs, was a featured speaker at the LTC Conference in Mississauga last week. The conference was organized by Munich Re and attended by more than 400 advisors.

Liston provided a glimpse into what happens after an LTC application leaves the advisor’s hands and the contributing factors that increase the chances of successful underwriting.

Discussing the increasing concerns about LTC decline rates, Liston joked about obtaining a flak jacket before facing the audience. “I figured I was going to need it,” she said. “Underwriting is sales’ worst nightmare, no doubt about it.“

As Liston pointed out, the LTC insurance underwriter examines four main categories of information, starting with whether the applicant’s height and weight fall within the guidelines, a seemingly obvious consideration that often amounts to a costly one.

“We decline about 7% of the applications just because of height-weight requirements,” she said.

According to Liston, overweight individuals tend to underestimate their weight by 37 pounds while underweight individuals tend to overestimate by 17 pounds. In her experience, she had encountered differences as high as 120 pounds between the applicant’s estimated and actual weight.

The next criteria, the ability to perform all activities of daily living (ADLs) and instrumental activities of daily living (IADLs), becomes less or more crucial depending on the applicant’s age.

“Not usually a problem when you are looking at a 40 or 50 year-old who is working full-time,” she said. “But if you are writing for applicants who are retired or older, I think it is key to make sure of those things.”

The next items on the agenda are as to whether the client meets the established guidelines and whether they meet the cognitive criteria for insurability.

Getting this information correct involves tactics that would strike one as a combination of detective work and careful application writing, Liston pointed out.

“It’s very important that you go through every question in every section,” she said, acknowledging that the potential difficulty.

“When you go into somebody’s house, use your eyes and your ears,” she said. “Why is there a walker in the corner? Did they actually walk to the door and let you in?”

This information gathering process should actually start before tackling the application with preliminary steps such as asking in advance about medications. This provides an early look into the client’s condition, especially when the advisor researches medications, ailments and stability period requirements.

“Medications are probably the number one indicator of health history,” she said.

Knowing this basic information allows for some pre-qualification at the outset. The basics include name of the medication, length of time the individual has used it and length of time for the current dosage.

In one anomaly, underwriters sometimes encounter an application indicating that the client has no major ailments but listing a large number of medications, she explained, evoking knowing laughter from some of the advisors present.

Post-application process

After completion of the application, the preparation process should include advising the client that the underwriter will probably obtain individual’s medical records and asking whether the information for the application provided will match data in those records. Validating those findings during a telephone interview or face-to-face meeting should include a memory exercise.

Liston urged advisors to familiarize clients with these procedures and their place in the overall LTC underwriting process. Vacation, business, and family commitments can mean delays, which the advisor can prevent by warning the client that someone from the underwriting carrier will make contact.

Another common but preventable delay is the failure of doctors to release records, a problem that the advisor can solve by asking the client to specifically request their release.

“This is a great time to get your client involved,” she said.

Art Melo covers insurance for several publications.

(10/27/09)