Even before the Long Term Care provisions of the PPA went into effect in January, 2010, it was repeatedly predicted in this column that the day would come when almost every life company would have some form of long term care or chronic illness rider. It is simply too easy to sell against those who do not. We now live in a world where “living benefits” has become a holy mantra.
A plethora of options to address the problem now exist, perhaps even more choices than the days of the apex of stand-alone LTCI health sales 15 years ago. But these riders are not created equal. You cannot escape two of the most basic principles of living: The Golden Rule, and “You only get what you pay for.” Sadly, at least as far as I’m concerned, the majority of these options are flawed and occasionally deceptive by default.
As a corporate consultant for the last 30 years I understand that these shortcomings may not have been completely intentional. They are the unfortunate result of a whole host of reasons or rationalizations: Early adopters that have not subsequently updated their offerings; pricing limitations where benefit reductions were required; benefit limitations needed to achieve other product emphasis; or marketing goals and, unfortunately, sometimes only half-hearted attempts to satisfy distribution without having to make a full commitment to solve the actual risk itself. Adding one reservation to corporate intent—expediency is never an excuse.
“Danger Will Robinson!” Read carefully the specimen policy and or rider that pertains to the circumstances required for benefit payment before you sell anything that remotely purports to address the subject of chronic illness in any regard. In no order of significance (and recognizing I may forget some) please look for the following:
I’m sure I’ve missed some “flaws” that will come to me after I turn this in so, bearing in mind this is an “opinion” column, here’s what should be considered ideal if your intention is to reduce, offset or pay for extended care. If it’s a 7702B rider without visible benefit limitations you’re good. Just bear in mind that you now have the pricing friction of two products tied together with a rubber band—and you really are selling two products which may increase price. Understand that under the NAIC 620 Guidelines a 101g rider cannot exceed the benefits of 7702B but it can and it should get right up against it like sticky onion paper. Changes made two years back at the IIPRC for policies filed through the IIPRC clearly now allow for this approach and the best examples follow that language. Be careful out there—it’s just not that hard to do it right!
Other than that I have no opinion on the subject.
Ronald R. Hagelman Jr., CLTC, CSA, LTCP
CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products. A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing "friend" of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman is president of Broadtower Insurance Solutions, a national IMO helping BGAs enhance LTCI production. Hagelman can be reached at Broadtower Insurance Solutions, Inc., 156 N. Solms Rd., New Braunfels, TX 78132. Telephone: 830-620-4066. Email: email@example.com. Website: www.BroadtowerInsurance.com.