Philosophies of Underwriting:
The long-term care insurance industry is at a crossroads. In an effort to shore up profits, insurers have tightened their underwriting standards. As the industry continues to mature, risk management techniques are being revised to protect the potential insured pool while still issuing coverage. There has been a misconception that the underwriting process is arbitrary and inconsistent. A thorough understanding of the underwriting process is critical for a positive outcome between the Company, Producer and applicant.

When you think about the underwriting process it begins with the Producer and must be thought of as an important tool to observe the applicant, assess the risk to the Company and determine coverage eligibility. Not all applicants qualify for LTCi. When the Producer uses this tool, along with Company underwriters, the common goal is to acquire profitable business. As long as the Producer, the applicant, and the underwriters are on the same team this outcome can be favorable for all.

For the Producer, it is important to have a good understanding of the underwriting process of the Company represented to help determine if an application should be submitted when certain conditions are present. The Producer must provide sufficient data for the underwriter to make a fair evaluation. The purpose of an Underwriting Guide, provided by each Carrier, is to help determine if the applicant is eligible for the product. When meeting with the applicant the Producer can take the first steps to evaluate the applicant’s health history, cognitive status, daily activities and the ability to perform and maintain activities of daily living (ADLs) and Instrumental Activities (IADLs). The conditions listed in the Guide represent those conditions most commonly seen during the sales process with the applicant present. The Guide can assist in evaluating the potential impact on underwriting of diagnosis and conditions which may be encountered during the interview and application process.

For the Underwriter, the goal is to issue as many applications as possible while protecting the risk pool of the business. Proper underwriting can sustain excellent claim experience. The prudent underwriter uses a 4-tiered approach when evaluating candidates for coverage. By embracing the “Right Model” technique, the underwriter is best prepared to evaluate risk. This technique consists of the right product, the right rate schedule, the right applicant and the right benefit plan.

An underwriter will focus on three main elements in the process of evaluating risk by ascertaining the degree of severity, control and stability of medical conditions and the impact of these conditions to the individual’s health status, functionality and cognition. The final underwriting determination will be based on the underwriting tools required for the applicant. The quality of recovery, proper control and the level of stability are significant factors in the overall determination. When all of these factors are aligned, the underwriter has less risk of missing the target.

Underwriting LTCi is different from other products like life insurance in that many things might be considered important and unique to LTCi:

• cognitive status
• functional capacity
• ability to perform ADLs
• ability to perform IADLs
• medical histories that may result in a loss of independence or need for care
• multiple medical problems which, in combination, are more significant
• multiple medications
• treatment modalities (e.g. current physical therapy)
• significant difference between the chronological and physiological age
• frailty
• factors that play an important role in maintaining an applicant’s personal independence; working full or part-time, spouse in good health, family or friends living in household, participating in hobbies and outside activities, current ability to drive, ability to travel and visit independently

During the client interview and assessment; by using visual observation, questions for the applicant to answer, and the Underwriting Guide, the Producer should be able to determine whether or not to submit an application. After using these tools, when in doubt about proceeding to submit an application, speak with an underwriter by contacting the underwriting specialist in your brokerage firm, your sales representative, or call the carrier directly if permitted in the Underwriting Guide.