Take Care With Long-Term Care

As an agent specializing in long-term care insurance, I am well aware of the substantial risk of lawsuits and regulatory investigations in selling this coverage. With America continuing to gray, long-term care (LTC) is gaining more fans on both the agent and consumer side, but it does present two major problems: First, LTC policies are relatively complex, particularly if you are only selling a few policies a year. Consumers are even more challenged to understand the intricacies of this coverage. Second, litigating a LTC claim can be frightening. Agents who fail in the first step — understanding the product and ensuring that their clients understand the product — often find themselves at the second step.

In my work as the national marketing coordinator for both the America's Health Insurance Plans' Partnership Training Program and the Long-Term Care Professional designation, I have developed a checklist of seven critical issues to help agents interested in the LTC product line. While this list was created primarily with those agents in mind, all producers may find some solid advice here that will help them keep a seat in the boardroom, not the courtroom.

Seven Critical Issues

Failure to Recommend Long-Term Care Insurance (LTCI) or Failure to Recommend an Appropriate Amount of Coverage. Producer and financial planners have run into trouble in situations where they have either failed to raise the possibility of buying LTCI coverage or have affirmatively suggested existing coverage is unnecessary.

Information Privacy and Security. Producers have direct obligations under the privacy and security requirements of the Gramm-Leach-Bliley Act and under business associate contracts or addenda to their producer agreements with LTC insurers (in conjunction with HIPAA's Privacy Rule and Security Rule). Confidentiality of medical information is crucial.

Suitability. Taking a one-size-fits-all approach will eventually get you sued. As regulators focus their attentions on suitability issues, it is imperative for producers to be mindful that they need to match the consumer's individual needs with the right LTCI policy features. You absolutely must take the time to understand your customers' needs and desires as well as their current and anticipated future financial means.

Premium Increases. Premium increases have been at the root of most of the class actions in the LTC context. A number of those class actions included allegations about what the agent said or didn't say. “This company has never had an LTCI rate increase,” may be appropriate to say if it's true, but you need to follow that up with a statement that past performance is not a guarantee of future performance. You do not want to say “there will never be a rate increase on the policy,” or anything that could be misinterpreted in this way. And you need to warn your clients to expect rate increases. They will be holding these policies for 10, 20, 30, even 40 years, so the possibility of a rate increase definitely exists.

The Need for Documentation. The risk presented by each of these issues is either magnified or diminished depending on how well you document your files. Taking copious notes of conversations and at meetings may strike some people as nothing more than annoying busy work that does nothing to build sales. It can be a nuisance, but your notes will be a huge asset if you use them properly. This is an area where using a checklist can be very helpful and save time. If you have a list of items to cover and you can go down the list checking items off as you go, you won't have to do as much writing or typing. You can just write in any key comments or memory triggers — like if you or the insured use an analogy, for example. Another idea that merits your consideration is the use of meeting receipts and/or confirmatory letters. By sending a post-meeting memo, you've not only put a record in your file of what was said, you've expressed it in writing to the customer. If they disagree with what you've written, they reasonably can be expected to let you know. If they do, you are much more likely to be able to resolve the issue immediately, not years later in a courtroom.

The Need for Good Insurance Protection. Every producer should have solid E&O coverage.

The Need for Prudent Communication. When you communicate with clients via a letter, fax, e-mail, or instant message, be careful. Documenting communications with customers is a great tool in your litigation defense shed, but like any hammer or saw, if you use it inappropriately or carelessly, it can cause a lot of damage. Electronic communications are particularly dangerous. Just because e-mails are electronic doesn't mean that they are any less permanent or serious than a letter. Whenever you send an e-mail, before hitting the send button, re-read the e-mail and think about how you would handle questions about it if your words were blown up to poster size and put in front of a jury.