Over the course of the last two years, we here at Senior Insurance Training Services are constantly being asked:
“Should I maintain my certification for selling the California Partnership for LTC Insurance?” or
“Should I get my certification to sell the California Partnership since my company doesn’t offer it” or
My Company does not allow me to offer the only company offering, so I don’t need it.”
Another comment is, “I only sell Hybrids; so I don’t need to be certified, Right?’ Yet another, “Because of the mandatory 5% compound inflation, built in feature, it’s too expensive!”
I have heard all these comments over the course of the last 23 years.
If I was running for political office my answer would be Yes! No! Maybe!
Since I have no intentions of ever running for a political office, the answer is “It Depends…” on you, the agent, the broker, the investment advisor.
Not your company. Not the company wholesaler, nor the MGA, SGA, GA or broker, it depends on you, whether you sell over the phone or face to face…the personal producer, the investment advisor, you are the ones at risk!
Let me explain, and as always, it requires a little history and or background. Remember, in the history of LTC insurance lies the answers to today’s many questions!
In 1993, California passed one of the most prolific pieces of LTCI legislation in the country; literally changing the face of LTC Insurance in California and eventually across the country. Better known as SB (Senate Bill) 1943, it changed the definition of long-term care Insurance, by introducing “Home Care” (Personal Care & Homemaker Services) as well as IADL’s (Instrumental Activities of Daily Living).
In addition to defining benefits and services, it created a whole new “Consumer Protection and Agent Responsibilities” Section (Article 3.7 Sections 10234.8-10234.97).
In particular, Section 10234.8 (a) with regard to Long-Term Care Insurance, all insurers, brokers and others engaged in the business of insurance; owe a policy holder or a prospective policy holder a duty of honesty, and a duty of good faith and fair dealing.
b) Conduct of an insurer, broker or agent during the offer and sale of a policy provisions to the purchase is relevant to any action alleging a breach of the duty of honesty and a duty of good faith and fair dealing. In addition to Section 10234.8 (a) &(b) is section 10234.93 “Responsibilities of Long-term Care insurers with respect to marketing procedures, supplying list of agents, training, buyer notification, inquiring about applicants existing insurance, adjustable procedures, insurance counseling, insurance shoppers guide (Taking care of Tomorrow) (We’ll get back to the Shoppers Guide).
c) Every insurer of LTCI in CA. shall:
1) Establish marketing procedures to “ensure” that any comparison of policies by its agents or other producers will be fair and accurate.
2) Establish marketing procedure to “ensure” excessive insurance is not sold or issued
Also, Section 10234.95 “Suitability Standard”, this is where “Pandora’s Box” lies! This section will be addressed in greater detail in the next article due to its extensive “compliance” concerns and subject matter. (This will be discussed in Part II)
Finally, under “Consumer Protections” comes section 10234.97 Replacement coverage: Sales Commissions, basis on improvement of insured’s position: Any time long-term care coverage is replaced, the replacement shall be contingent upon the insurers declaration that the replacement policy materially improves the position of the insured, pursuant to section 10235.16 (What does that mean?)
This section is repeated verbatim under SB281, Life Insurance, and accelerated death benefits section of the Insurance Code. Section 10295.9 Application forms for accelerated death benefits shall include a question designed to elicit information as to whether the accelerated death benefit is intended to replace any Long-Term Care insurance presently in force. In recommending the purchase or replacement of any policy or certificate issued under this section, an agent shall make reasonable efforts to determine the appropriateness of a recommended purchase or replacement.
Wow! So at this point, let me help connect the dots.
If you have not been “Partnership Certified” or have maintained your certification, an attorney has “Reasonable Grounds”, to challenge your “compliance” of section 10234.8 (a), Section 10234.93 (c) (1). If this discussion involves a replacement then you may be subject to section 10234.97 (a) of Life/Annuity LTC Hybrid Sales.
As I write this article, the California Legislature is currently debating SB255 that will expand and improve the California Partnership! Part of that discussion over the past 3 years regarding the California Partnership is how this product differs from traditional versus Hybrids. Essentially, there are three types of LTC products available to Californians, Hybrids, Traditional and Partnership. Regulators, Legislatures and Consumer advocates are asking what are the differences between the three and the markets associated to them. The question to me has always been “are the agents/producers of Long-Term Care Insurance in this state receiving the necessary training to address these three products and the differences between them? My answer is no!
Remember, since 1993, SB 1943 requires all agents selling “traditional” LTC insurance to receive 8-hours of LTCI “specific” training (online, webinar and or in classroom). In 1994, the California Partnership was launched and it has required agents wanting to sell the Partnership to receive an additional 8-hour (classroom only) requirement. Both courses applied to ones overall CE requirements, however, back through the 90’s and early 2000’s it was mutually agreed amongst the industry and regulators that if you didn’t want to sell the Partnership, you weren’t required to take the training.
During 2000 through 2010, the majority of producers throughout California were getting the Partnership training due to the fact that there were seven (7) carriers, five (5) brokerage (CNA, Genworth, John Hancock, Met Life and Transamerica) and two (2) captive (Bankers Life & Casualty and New York Life).
Back in those days, when one compared the two policies together, dollar for dollar, apple to apple comparison (type, dollar, duration, elimination and 5% compound inflation) the premiums were almost exact as well as the commission payout.
The only difference was that the Partnership provided “state endorsement “(A good housekeeping seal of approval), a unique “care management feature, a Rate Cap feature, and Asset Protection! So when presented to a prospect, ten out of ten times the client would say “Tell me more about this Partnership Program”.
However, by 2010, CNA and Transamerica had left the industry. John Hancock temporarily left the California Market and Met Life left the market entirely. In 2012, John Hancock reentered the California market; but with a “shocking revelation”, due to the fact that California LTCI law requires all companies to “offer” 5% compound inflation in all of its “traditional LTCI offerings”, but after that a company can offer any other option (none, CPI, 1%, 2%, etc) but with the Partnership, it “must be” built in all products to anyone age 69 or less than, no other choices.
Hancock priced that 5% compound by an additional 100 to 150% additional premium depending on age. Quickly, every other insurer did the same; making the Partnership unaffordable. Due to substantial cost increases, the Partnership sales crashed, John Hancock withdrew its product, and Bankers pulled its product and New York Life finally withdrew from the program, leaving only Genworth, who then re-priced their Partnership product to follow the others, thus making the program/product unaffordable to the masses (80% of the middle market).
Also in 2010, with the expansion of the Pension Protection Act, many companies began to expand into the “Asset Based” Hybrid/Life and Annuity LTCI Marketplace. With the options of “no inflation”, guaranteed premiums, and “If you don’t use it, you don’t lose it”, pitch! These types of products have gained popularity amongst the broker dealer channels as well as the high end “investment/financial” planning fields with great success.
So much so, that an attempt to regulate that product was attempted in 2013 with the passage of SB-281. In that bill (which is now law) attempts to define the difference between a life policy with an accelerated death benefit versus a life policy with LTCI benefits (some refer to the tax code-a 101 G policy=Accelerated death benefit with no LTCI features versus a 7702 policy which refers to a Hybrid policy with “qualified” LTCI benefits). If the Hybrid meets the later definition, then it must meet the same provisions of the LTC Insurance Code of California down to the “replacement” requirements and LTC Insurance 8 hour “basic” course (Section 10295.12)
However, here lies the Rub! SB281, section 10295.12 says “Agent knowledge of and ability to describe differences between benefits (a) Insurers shall “ensure” agents offering, marketing or selling accelerated death benefits on their behalf are able to describe the differences between benefits provided under an accelerated death benefit and benefits provided under long-term care insurance, as follows: and then the code lists eight (8) requirements that the agent/advisor must be able to describe and or illustrate.
Remember, there are three (3) types of LTCI products available in California:
Hybrids, which come in 3 flavors a) A whole life policy which has an LTC benefit which is part of the Life Policy b) A UL policy that offers an LTCI rider and c) An Annuity that offers an LTC rider/benefit.
Then there is a “Traditional” LTC Insurance policy that offers multiple daily $ benefits with no minimums, multiple elimination periods with really no caps, multiple inflation options including no inflation coverage and multiple “bells and whistles galore” options made available by the company subject to approval of the DOI.
Then comes the CA Partnership, a state certified, “ASSET” Protection (and being able to explain how that works and what type of assets are we talking about! ), a unique care management feature, and Rate Caps.
So, if I want to be able to perform the duty of honesty and good faith and fair dealing with regards to the “selling” of LTC insurance benefits and even come close to meeting section 10295.12 of SB 281 above, and if because at any time the client says “I’m shopping, I’m comparing or I already have Long-Term care insurance but because of multiple rate increases or my parents bought this Partnership policy and how does this differ from the one your presenting?
Or, I was giving this LTCI guide from HICAP or the Local Area Agency on Aging or I called the DOI and they referred me to this book called “Taking Care of Tomorrow”, A consumer guide to Long-Term Care and Inside there it gave me 10-questions to ask my agent about any LTC Policy and the first question they ask is, #1 Is my agent authorized to sell me either an individual (traditional), or a “Partnership” policy?
Then “Yes” you should maintain and or receive your Partnership Certification!
If a policy has a limited or short duration type of coverage and there is a chance that they could trigger the benefits, exhaust then and still need care? Should I discuss the partnership and its “ASSET” protection feature? Yes!
Should I cover all my E&O options when selling Long-Term Care insurance? Yes!
So, the final question is “Should I maintain my Partnership Certification and or become Partnership Certified?? How good is your E&O?
Call Senior Insurance Training Services at 800.460.7487 or check out our course calendar and register online to become “Certified” for LTC in California.
