Long Term Care Insurance: the definitions clarified

End of life issues can be disturbing to contemplate, let alone plan for. Long life can be a mixed blessing, as advanced ageing is often marked by regression our ability to look after ourselves.

Activities of daily living (ADLs) are often lost in the reverse order that we gain them in childhood, according to speakers at Munich Re’s second annual long-term care insurance conference held recently in Montreal.

Typically, the first to go is the ability to bathe ourselves. Then dressing becomes a challenge, followed by grooming, bladder control and even moving about our homes. Finally we may even lose the ability to feed ourselves.

To claim LTC insurance, you either have cognitive problems, such as dementia or Alzheimer’s, or require “substantial assistance” in at least two ADLs.

But how does one determine a need for substantial assistance?

“If the insurance premiums in long-term care captive, eliminating much lower than disability, it is because the conditions are more restrictive,” said Charles Tremblay, assistant vice president for claims Munich, before going review the acceptable definitions for each ADL.

Crawl to be insured

Of course, bathing and dressing are at the center of attention, since these two ADLs are usually the first to be lost. The two ADLs were the subject of court decisions, which rendered clearer definitions.

In bathing, “substantial assistance” is defined as the inability to bathe even with the use of an assistive device, such as a support handle.

“If the person can take a bath but was forced to crawl to get there, the court found that this was a need for substantial assistance. Substantial, is the key word here,” said Tremblay.

Dressing is more subtle. In one case, a woman was no longer able to button her clothing, but was able to use a zipper or clothing that did not include a closure. However, because she had worn clothing with buttons all her life, the court recognized her as needing substantial assistance.

Smith mentioned another problem case, this time concerning continence, fourth on the list of the six ADLs. But his team did not attempt to explore the topic in court, opting instead to preserve the client’s dignity by meeting with him outside of the courtroom setting.

Definitions of requiring “substantial assistance” in performing an ADL will become clearer in the future as more jurisprudence is built up, but at present, the relative youth of the product leaves room for interpretation.

“The courts have begun an ersatz interpretation in Canada. At most three causes were considered to date,” said Tremblay.

A young product… for the elderly

Leading LTC claims are musculoskeletal problems (most often as a result of accidents) with 36% of cases, followed by cancer (22%) and neurological disorders (19%), according to a diagram presented by Tremblay.

“But the neurological disorders like Alzheimer’s and dementia will certainly gain ground,” he predicted. “Cancer should maintain the same position.”

There are happier statistics, however: 49% of claims end in recovery, with an average of 135 days at home and about 400 days in institutions.

For now, the average age of a claim in Canada is 78.7 years, compared to 61.6 years for disability insurance, which is due to the relative youth of the product in Canada, according to Tremblay.

“I tip my hat to advisors who took the time to build expertise in LTC insurance,” says Nathalie Tremblay, product manager for health products at Desjardins Financial Security Health.

“This conference helped the advisors understand how to apply the definitions and it is reassuring to see that it is largely a matter of common sense,” she said. “If I was a advisor, it would comfort me in my role because I know exactly when this product pays; things are clear.”

To sell the SLD, silence is golden

Despite the near inevitability of ageing, selling LTC to a client who appears to be in good health remains difficult, said Denise Liston of LifePlans.

Outside of guidelines on the client’s weight and size, it is difficult for the seller to identify pre-existing health conditions or cognitive problems.

“Your best tools are your eyes, nose and ears,” Liston said, before giving a host of tips and tricks to discreetly assess the current health of a client.

For example, if they employ a cleaning lady, ask them what they would do if they couldn’t have that service for six months.

“Some will tell you they do not see themselves doing chores, and learn that they have back problems,” she said. “Put simply, ask open questions and listen to the answers. Silence is golden: people talk more when you are silent.”

A promising future

Advisors are missing many opportunities to sell LTC insurance, according to Greg Pearson, from Living Benefits Solutions. He said there were only 500 independent advisors in the country selling the product to a clientele of 63,000 people. Total sales were are only $80 million.

“Two hundred and fifty thousand Canadians celebrate their 65th birthday each year. For the first time, we will have 4 million seniors. In 2031, a quarter of Quebecers will be over 65 years of age and their life expectancy will be 82 years for men and 86 for women,” he said.

“The difference narrowed between men and women, not because of a healthier lifestyle for men, but because women are very active in this generation ad have accumulated the same stress in their lives as men.”

Tongue-in-cheek, Greg Pearson stressed the importance of LTC insurance in a world where children no longer take care of their parents as before.

“My own son would rather refuse his inheritance than go and change my diapers when I’m 86 years old,” he said. “Our generation, who are your customers, will need additional support, especially if we want to receive care at home, and it will not come from the government.”

(10/08/10)