Claims are the lifeblood of any insurance business. If claims are not paid accurately, promptly, and smoothly, no insurance job is justified because all insurance jobs are created fundamentally to pay clients’ claims.
In the long term care insurance (LTCI) industry, there are high-level indicators and detailed experiences that claims are paid well, but there is always room for improvement. As an industry, it is important to optimize results for the consumer and to publicize our success. Criticism, whether valid or not, lives forever on the internet. And people are generally more determined to share dissatisfaction than to describe outstanding service.
Beyond being our mission, favorable claims results are critical to the growth of the LTCI industry (including stand-alone LTCI and all types of combination products, collectively “LTCI” herein). A strong reputation for paying claims encourages producers to recommend that clients consider LTCI, encourages clients to buy and adds meaning to the lives of insurance producers (“producers” herein) and home office staff.
Producers can help by educating clients regarding claims provisions, so clients will know what to expect and also what not to expect. Such education should be refreshed upon periodic reviews. Producers can also help by finding optimal coverage for the client, which can require, among other things, detailed understanding of LTCI policy provisions.
Over time, producers can help clients recognize when a claim might be imminent and can help clients prepare for a claim and deal with their insurer effectively at claims time.
Insurers have a significant challenge. Their responsibility to pay claims promptly and smoothly must be balanced with accuracy. Overpayment of claims can lead to price increases on inforce policies and can encourage individual and coordinated fraud.
Most people recognize that existing processes can be improved. That is evident because even insurers with closed blocks of business have invested a lot of money to improve their claims practices.
In this series of articles we intend to look at many aspects of the claims process, hoping to help the industry improve and market stellar service. We’ve teamed together because we share passion for this topic and because it is daunting and benefits from multiple perspectives. We can do a better job if producers, home office staff and perhaps other readers help. At any time, readers are invited to send questions, comments, examples of favorable or unfavorable claims processing, and suggestions to either or both authors:
- Claude Thau, claude.thau@gmail.com.
- Ramona Neal, livingbenefitreview@gmail.com.
Here is one of Claude’s favorite claims experiences: I was about to go on a webinar when I got a phone call from a former associate who had spoken with three sisters whose mother was on claim. Naturally, claim payments were going to the claimant’s husband. But, unbeknownst to the insurer, he had repeatedly refused to pay for his wife’s care, telling his daughters that it was his money to spend as he’d like. As I had only a few moments before the webinar, I quickly left a message for a claims person at the insurer. During the one-hour webinar I saw a flurry of notices in the corner of my screen indicating communication. After the webinar I saw that the bursts of email identified the client; secured information demonstrating that claim payments should go to the daughters; and informed them that the benefit payment had been switched to them. Within an hour, the problem had been fixed!
Certainly, there are a lot of claimants/families who have been frustrated seeking LTCI claims; we’ll address at least some of those issues in this series. However, as we noted earlier, there are some high-level indicators that the industry is doing a good job.
- The industry has paid about $225 billion in claims, projecting from the $196 billion as of year-end 2022 reported in the 2024 Milliman Long-Term Care Insurance Survey published in Broker World magazine in July/August, 2024.
- The NAIC passed Independent Review (IR) of LTCI claims to help clients get satisfaction if they think their claim was improperly denied because they were deemed not to be “chronically ill”. (For text, see p. 62+ of https://content.naic.org/sites/default/files/inline-files/committees_b_senior_issues_exposure_ltc_model_act_641.docx). Most LTCI insurers extend IR beyond statutory requirements (e.g., to policies issued prior to the effective date of IR). Nonetheless, only a very small percentage of claims go to IR. Steve LaPierre is president of LTCI Independent Eligibility Review Specialists, LLC (LTCIIERS), the largest IR organization. He reports that they upheld the insurer’s decision 98 percent of the time in 2022. It speaks well of the industry that they extend IR beyond legal requirements, that few claims go to IR and that 98 percent of those going to IR are resolved in favor of the insurer.
- A 2010 study of LTCI claims payment accuracy for the Department of Health and Human Services1 found that insurers paid 3.3 percent more in claims than the auditors felt was justified under the terms of the contracts. Naturally some claims were erroneously declined, but the auditors found that the questionable claims which were paid* more than offset the claims that the auditors felt were erroneously declined. (*The auditors didn’t say those claims should not have been paid, just that there was not adequate justification in the files.)
The study included seven insurers which were responsible for 70 percent of the claims at that time (Bankers Life & Casualty, Genworth Financial, John Hancock, Long Term Care Partners, Medamerica, Metropolitan Life, and Prudential.) Other insurers might have had different results. - It is ironic that we hear so much about the huge rate increases on older LTCI policies (generally those issued before 2010 and worst for those issued before 2000) but we don’t hear the flip side: State regulators would not be approving those rate increases if they were not convinced that the insurers are paying a lot more claims than they expected and will continue to do so.
Our future articles will cover topics such as:
- The insurers’ perspective: Challenges they face, actions they’ve taken and areas of potential improvement.
- Ways producers can help clients reduce claims, prepare for claims, recognize that claims are imminent and get claims satisfaction.
- Key provisions that producers should note. (The importance of such subtleties encourages some producers to outsource LTCI sales. There are many ways producers can have very positive long term care planning conversations with clients, identifying a possible interest in LTCI before introducing their client to a specialist.)
- Regulatory issues.
