The are only four kinds of agents with LTC Insurance Clients:
- Agents with clients who have had a rate increase
- Agents with clients who are having a rate increase currently
- Agents with clients who will have a rate increase in the future
- Agents with clients who have had, are having and will have rate increases in the future
Unless you plan to bury your head in the sand regarding LTC Insurance and miss the greatest marketing opportunity in the history of insurance, it isn’t a matter of if your clients will face a rate increase, it is only a matter of when they will face a rate increase.
When your client or their family calls you for answers to why their LTC Insurance premiums have increased by #$^&*! %, what will you say and do?
We’ve had the opportunity to address this question for the clients of several agents recently. Here’s one scenario:
I have a couple clients who purchased California Partnership policies in 2011 who need to reduce their policies due to the most recent rate increase. Right now we’re kind of stuck because, the carrier’s customer service staff is telling me that we can’t downgrade to non-partnership.
So, we can reduce the $ per day sufficiently to keep the premiums more or less level. Although I know I can drop the number of years by 1-2, that’s not what they want to do, and doing that with a 10% reduction in benefits won’t be enough anyway.
Also, if they could downgrade from partnership to non-partnership and reduce the $ per day further that might solve the problem I know that California Partnership rules are changing next year, but I don’t know how that will alter my ability to change their policies.
My understanding is that if we were able to change the inflation rider, that would have the negative consequence of having their current $/day benefit recalculated from when they first purchased their policy. Otherwise, I would consider suggesting a change to 5% simple.
We reached out to Brenda Bufford, Chief of the California Partnership for Long-Term Care, for her perspective:
We’re not sure why the carrier is telling the agent that the couple cannot reduce the minimum daily benefit and opt to lose their Partnership status.
As long as the couple is well aware of what they are doing and they choose to do so, we will not and don’t oppose them doing so. This may be an insurance company policy which we are not aware of, but it is not a policy of the Partnership.
As a result of the signing of SB 1046, which takes effect January 1, 2019, if an insured chooses to downgrade their inflation protection, they must also have the option to preserve the existing value.
If a policy or certificate contains an inflation protection provision, both of the following shall apply to a reduction in coverage:
If a policyholder or certificate holder chooses to reduce a daily, weekly, monthly, or lifetime benefit amount, then he or she shall be given the option to continue inflation protection benefit adjustments in the same manner and in the same amount as the contract in force before the reduction in coverage.
If a policyholder or certificate holder chooses to reduce or eliminate the benefit adjustments provided by an inflation protection provision, then he or she shall be given the option to continue the daily, weekly, monthly, and lifetime benefit amounts in effect at the time of the reduction.
This applies to any reduction in coverage, regardless of the original policy issue date.
In addition, although we can have a policy with the 3% inflation factor, according to the Department of Insurance, the insurer would need to file and have approved a 3% Rider and the accompanying rates before they can offer this inflation provision as a way to mitigate the effects of the rate increase or eliminate the rate increase.
Insurers currently have the following options to offer policyholders to offset the rate increase:
Reduce the lifetime maximum benefit
Reduce the daily benefit
Extend the elimination period
Contingent Benefit Upon Lapse – where the policy becomes paid-up and the maximum lifetime benefit is reduced to premiums paid
Will the Partnership allow the minimum daily benefit to be reduced to $100 and still be considered Partnership in the wake of the SB 1248?
I don’t see a problem with that, as long as the policyholder is educated on what they will be “giving up” with a reduced minimum daily benefit . I think that the Department of Insurance may want to weigh in on this as well.
Thank you, Brenda, for that detailed analysis!
If you need help answering your client’s questions or you are ready to seize the greatest marketing opportunity in the history of insurance, sign up today for our new LTC Education package, which includes:
27 Hours of California Insurance Continuing Education Credit plus LTC Insurance Sales Education, including:
- California Partnership for Long Term Care CE Course (8 Hours – Classroom)
- California Long-Term Care Insurance CE Course (8 Hours – Webinar)
- California Hybrid LTC Solutions (SB 281) Online CE Course (4 Hours)
- California Annuities Online CE Course (4 Hours)
- California Ethics Online CE Course (3 Hours)
In addition, you’ll have access to all of our LTC Insurance sales training and tools:
- Long-Term Care Client Education Fundamentals
- LTC Insurance Client Education Fundamentals
- LTC Insurance Prospecting Skills
- LTC Insurance Sales Interview
- LTC Insurance Selling Skills
- LTC Insurance Sales Tools
As in added bonus, if you sign up for our LTC Education Program before Thanksgiving 2018, you’ll enjoy a one-hour phone consultation with me, Tom Orr, to discuss your LTC sales strategy or any questions you have about marketing and selling LTC Insurance.
Unless you are a LTC Insurance Ostrich, you are one of the four types of LTC Insurance agents dealing with rate increase questions from your clients. We’re here to help you create solutions that are in the best interest of your clients.