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"A cursory look at long term care carriers doesnt work anymore."
That statement from a LTC specialist summarizes the views of many LTC insurance producers and even some LTC carriers. Several talked candidly with National Underwriter about what producers can do to choose a LTC carrier with whom to contract or to place unique cases.
The short-form answer is: Do your due diligence.
"Producers need to contract with and place business with LTC companies that are as solid as a rock," says Neville Verster, the producer who made the comment above. He is president of LTC Insurance Solutions L.L.C., in Fountain Hills, Ariz.
"What we dont want," he stresses, "is to place clients with companies that will introduce 40% to 50% rate increases within, say, four years."
Therefore, before ever contracting with a company, producers should ask some probing questions of the companys senior management and the LTC product actuary, he says. For instance, find out what the companys strategy is on rate increases and also its past history on rates and claims.
"In addition, look at the companys assets and surplus and at its annual report, as well as its ratings. Ask yourself, is this company over-extended? Would you buy or sell its stock if you were an investor?"
In other words, give the company careful scrutiny, Verster advises.
A lot of producers are thinking that way today, confirms Christopher Rogers, general director of LTC market development at John Hancock in Boston. In the last year, he says, Hancock has seen "a significant increase" in questions from producers. They ask about things like company ratings, brand and rate stability.
One factor fueling this trend is news that some LTC carriers have instituted rate increases on in-force blocks of business, he says.
Another factor is consumer demand. Potential buyers are more educated about LTC insurance than in the past, Rogers explains, and they are asking their sales reps informed questions. So the reps call the carrier sales desks to get accurate answers.
Still, another factor is the growing number of financial reps who are coming into LTC sales from other financial sectors. They call to learn more about LTC, Rogers indicates. At Hancock, he notes, many of the callers now include planners and financial consultants, in addition to LTC specialists. Others are stockbrokers or managers of stockbrokerage firms.
All these people are asking not only about ratings and company stability, he says. They are also asking about product features. "For instance, today many inquire about whether a product has home care or family needs benefits."
He suggests the inquiries on this are increasing because the features are becoming more popular with consumers.
Running a comparative analysis of product features really helps, says Michael Middleton, a LTC specialist with MassMutual Financial Group in the Overland Park, Kan., office. Although he is a career agent with MassMutual, he says he also represents other companies when the need arises. This means he sometimes has to select from products and companies with which he does not have everyday familiarity.
How does he choose? He says he runs software that lets him sift for product and company comparisons. "This helps me consider the competitiveness of the products, and demonstrate credibility and objectivity, too."
Middleton uses other software, as well. One product screens LTC companies by ratings, length of time in business, historical data and other factors, even the Comdex rating score. (The Comdex score is a numeric composite average of individual scores from top-rating agencies.)
Middleton filters all this against his own personal criteria. For instance, "Comdex scores are 100 or lower, and I prefer to work with companies at 90 or above." Also, he says he prefers a company that has been in business 10 years or more, has excellent individual ratings and is a multibillion-dollar company or corporation.
"Diversified companies of significant size" are tops on his list. Such insurers will be better positioned to pay claims in the future, he explains, as compared to, say, a small company. "Thats not a guarantee, of course, and bigger is not always better. But its something the agent can use as a measure" when selecting companies.
Staying power is a big factor. Dominic Mogavero, a LTC specialist at Strategic Financial Partners in Waltham, Mass., puts it this way: "I look for the 800-pound gorilla. I want companies that have been in the business a long time, have tons of money, are committed to the product line and offer LTC plans that are comprehensive."
Such companies will likely understand LTC underwriting and price so they wont have to keep on increasing rates, he explains.
If a company is a LTC newcomer or has less than five to seven years LTC experience, he says, "Id look to see if it has many years of general insurance experience. And, Id prefer that the company have experience in disability income insurance–because this suggests it would be more likely to understand disability-related medical claims."
Mogavero also looks for top financial ratings, generally A+ and higher. "Thats not to degrade B-rated companies," he says, "but a lot of clients tell me they cant take the risk of being with a B-rated company."
