Understanding
Long Term Care Insurance
Underwriting
Betty Doll, MBA, CLTC
Doll & Associates Long Term Care Insurance Services
www.BettyDollLTC.com
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Regardless of the type of
insurance being discussed,
insurance underwriting is
essentially calculating the
risks.
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Morbidity vs. Mortality
• Mortality: Measures
the risk that a person
is going to die earlier
than the average life
expectancy for
someone of that age
– Most important risk
when writing life
insurance
• Morbidity: Measures
the risk that a person
will live with a
debilitating condition
that can impact their
ability to function
independently
– Most important risk to
consider when writing
long term care
insurance
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LTCi Underwriting
• Evaluates the risk that the applicant will
need help with the activities of daily living
or develop a significant cognitive
impairment requiring constant supervision
• Less actuarial data to rely on than is found
for life insurance
• Lapse ratios are much lower for LTCi than
for life insurance
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Insurability
• Each carrier has a list of conditions that are
uninsurable—these include the presence of
chronic conditions and or the use of supportive
equipment such as walker, wheelchair, or use of
oxygen.
• Most carriers also publish a list of medications
the use of which results in the applicant being
uninsurable. It is important to determine why
each medication is being used—occasionally the
med is being used for a reason other than it’s
typical usage and the person may be insurable.
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Uninsurable Conditions
• The presence of certain conditions will routinely
rule out being able to obtain coverage.
Conditions include: Alzheimer’s or other
dementia, ALS, MS, Parkinson’s disease, active
cancer, AIDS
• Applications for multi-life coverage may result in
some simplified underwriting but most will still
rule out the conditions listed above
• True group/guaranteed issue products are
available from a few carriers and have
participation requirements to get guaranteed
issue
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The Role of the Underwriter
• Underwriters look for information in the
application and in the medical records to
help them determine the risks in each
individual case.
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Underwriting Concerns
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Cognitive impairment
ADL impairment
Musculoskeletal issues
Co-morbid conditions
Multiple medications
Current or recent physical therapy
Independence factors
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Cognitive Impairment
• Cognition includes basic processes of
perception, attention, memory, reasoning,
decision-making and problem-solving
• Problems with cognitive impairment can
result in misuse of prescription meds, car
accident, squandering life savings
• Disease, meds and head injuries can
affect cognitive abilities
• Cognitive impairment is often progressive
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ADL’s
• The lack of ability to perform ADL’s is one
of the triggers for tax qualified long term
care policies
• ADL’s include: bathing, dressing,
continence, toileting, eating, and
transferring
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Instrumental Activities of Daily
Living
• IADL’s are activities that support independent
living. The need for assistance only with
IADL’s will not trigger the benefits of the LTC
policy
• The existing need for assistance with IADL’s will
generally result in the person being uninsurable
• IADL’s may include: Meal preparation,
housework, laundry, managing money, taking
meds, driving
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Musculoskeletal Issues
• Osteoporosis is found in men and women
• Osteoporosis increases the risk of
fractures from falls which is a leading
cause of the need for long term care
services
• Severe arthritis can also limit the ability to
live independently
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Co-Morbid Conditions
• Co-morbid conditions are those whose
presence makes other conditions more
significant
• Examples: Diabetes with Obesity, Asthma
with Smoking
• Multiple Medications: May cause adverse
side effects
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Physical Therapy
• Current (or very recent) physical therapy
treatment is usually a red flag for
underwriters. They will want to know the
outcome of the treatment before accepting
an application. They cannot assess risk
while treatment is ongoing or if condition is
not yet stable.
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Independence Factors
• The applicant’s current level of
independence is a good predictor of their
ongoing level of independence.
• Many carriers ask questions related to
hobbies and involvement in volunteer work
as an indicator of current activity level.
• It is the producer’s job to “paint a picture”
of the client for the carrier.
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Immobility
• Difficulty with movement can be a result of
many different conditions including
orthopedic conditions (osteoarthritis or
fractures), neurological conditions (such
as stroke), or psychiatric conditions
(severe depression)
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Instability
• Instability may be caused by vertigo
(dizziness), musculoskeletal conditions
(e.g. arthritis), or by alcohol, drugs, or side
effects of drugs
• Instability may result in falls and/or injuries
which can then lead to a need for care
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Incontinence
• Incontinence is a lack of bowel and/or
bladder control. This may be caused by
conditions such as multiple scleroses,
stroke, benign prostatic hypertrophy
(BPH), drug effects or urinary tract
problems.
• If incontinence is an issue for an applicant,
make sure to spell out the reason for this
in detail on the application
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Iatrogenic drug reactions
• Iatrogenic: “Inadvertently induced in a
patient by a physician's activity, manner,
or therapy”
• Iatrogenic drug reactions are common in
the elderly. Studies show that the average
geriatric patient takes eight different meds
daily. Thus there is significant risk of drug
interactions, toxicity, and dosage errors.
Any of these may adversely affect
intellectual capacity and/or physical
abilities.
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Screening for Cognitive Impairment
• Because a cognitive impairment is
potential more costly than other health
problems, most carriers use some kind of
memory screening questions in the phone
or in-person interview they conduct with
the applicant. Face-to-face interviews are
routinely conducted with applicants over
age 70 and may be conducted with
younger applicants.
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Rate Classes
• Most carriers offer at least two rate classes
(Preferred and Standard) but some offer up to
five classes.
• Agents should utilize available resources
including underwriting guides and underwriting
hotlines to attempt to provide and accurate
quote for coverage—it’s best to be conservative
in your ratings. Carriers will issue the policy
based on medical data regardless of the rating
you indicated on the application or quoted to the
prospect.
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Pre-Underwriting Your Client
• It is important to get adequate information
from the prospect to allow you to
determine insurability and likely rate
classification
• It is helpful to obtain the information before
meeting with the client if at all possible—
you can provide a health questionnaire to
be returned to you or you can obtain the
information via the phone
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Pre-underwriting Questions
• Date of Birth
• Height/weight— at last doctor visit
• Medications prescribed (frequency, dosage).
Usually need a period of stability on meds
– Hospitalizations in past 10 years
• Tobacco usage in past 5 years
• Other health issues in their medical history
• Procedures/surgeries that have been
recommended but not completed
• Current P.T.?
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Helpful Hints
• Information that is important but often
missed relates to height/weight issues, the
use of anti-depressants, current physical
therapy treatment, and/or the use of a
CPAP machine. These may or may not
affect overall insurability but they will affect
the rate class assigned and your quote
should reflect that.
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Height/Weight Issues
• Hint: It is easier to ask height and weight
over the phone rather than when the
person is in front of you.
• Being under- weight can be an issue as
can being overweight
• Carriers have different guidelines for
insurability and rate class. You can find
the charts in the underwriting guides of
each carrier.
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Asking Health Questions
• You will become more comfortable asking health
questions—just as you became comfortable asking
financial questions
• Start by saying “tell me a little about your health” and
then move on to more specific questions. Do NOT settle
for “we’re in good health”.
• Some conditions require more extensive questioning—
e.g. the “staging” of cancer, date of last treatment, A1C
scores for diabetes, any complications related to the
condition, how long ago was the diagnosis made
• Underwriting hotlines are helpful sources for information
on conditions and direction on what additional
information to request
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Career Agents
• Your carrier publishes a field underwriting
guide – should be available in hardcopy or
as a download.
• Underwriting guide provides info on
different medical conditions and how they
are rated. It also contains height/weight
chart.
• The people on the underwriting hotline are
your friends! Utilize them.
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Independent Agents/Brokers
• Obtain the underwriting guides for each carrier
you represent
• There are software programs that allow you to
enter an impairment or combination of
impairments and check the requirements of
selected carriers simultaneously
• Being familiar with the various underwriting
requirements can help you chose the best
carrier for your client
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Completing the Application
• Remember to watch for co-morbid
conditions
• Don’t hesitate to call the underwriting staff
with pre-underwriting questions
• On the app, paint a picture of the
applicant’s health situation—they may be
much healthier than they appear on paper.
Help the underwriter see the whole
picture.
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Preparing Your Client for the
Underwriting Process
• Carriers have different underwriting
processes in general and requirements
may vary based on the age of the
applicant—many have brochures
available to explain their process
• Older applicants will go through a more
rigorous underwriting process
• Explain to the applicant the difference
between underwriting for morbidity vs.
mortality
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Underwriting Tools
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Application
Phone History Interview (PHI)
Face-to-face interview (FTF)
Medical Records (APS-Attending
Physician’s Statement)
• Para-medical exam
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Underwriting Decisions
• Approved
– Coverage is approved.
– The rating may be different (less favorable
or more favorable) based on the
information received during the
underwriting process.
• Declined
• Approved with Modifications
• Reconsideration offered
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The Appeals Process
In some situations a declined application can be appealed.
The applicant or the physician may have additional
information that will affect the decision in a positive
manner.
Appropriate documentation (usually test results or a letter
from the physician) will need to be submitted and
reviewed by the underwriters.
Changes in underwriting will be made if appropriate. Note
that this does not happen often and should be attempted
only if you truly have additional supporting
documentation.
Process can be frustrating to the applicant and to the
producer.
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Reminders
• Remember that underwriting for LTC is
about morbidity rather than mortality.
Most physicians do not understand this—
may have told the applicant/patient that
“you could live forever with this condition”.
That is the type of condition that may not
affect mortality but could increase the
likelihood of a long term care need.
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Summary
• The agent must get comfortable with field
underwriting
• Tools available include written underwriting
guides, access to underwriting staff, possible
resources from your General Agent
• Do NOT submit apps that do not meet
underwriting guidelines—it is a waste of your
time, the applicant’s time, the underwriter’s
time, and the carrier’s resources.
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Presented by Betty Doll, MBA, CLTC
Doll & Associates Long Term Care Insurance Services
Asheville, NC
www.BettyDollLTC.com
Broker, Trainer, Consultant
“Making the discussion of long term care planning easy, enlightening,
and enjoyable.” ™
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