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Agents’ E&O Loss Control Procedures

Prequalifying Prospects for Long Term Care Insurance

Every interaction with a potential client creates the risk for a future E&O claim, especially when you do not exercise routine procedures.

If someone contacts you about Long Term Care Insurance, it is a smart practice to prequalify that person by telephone. Failing to make the time to prequalify a potential client could result in pursuing a sale that will never happen. It is in your best interest to manage your time and travel costs effectively. A prescreening phone call will also provide the opportunity to begin a professional relationship with the prospect(s).

You’ll want to ask if the person has ever been declined or rated-up for Long Term Care Insurance and the reason(s) why.  All LTC Insurers do not underwrite the same, but the response to this question could present a red flag. You never want a potential client believing they are automatically eligible for a policy just because you had a conversation with them. A good E&O risk management procedure is to state, in writing, that the final decision for eligibility and premium remains with the Underwriting Department at the Insurance Company.

Height and weight are critical components of the underwriting process and a great aid when determining which rating class would be the most accurate to present.   Some potential clients have had no treatment for any health conditions; they simply are morbidly obese and cannot quality for any rate class with the LTC Insurer.   The Insurer’s Underwriting Guide will show immediately that this person is not a risk the insurer wishes to assume for Long Term Care Insurance. Make this one of the first questions you ask.

You should have the health history area of the application in front of you as it is an excellent guide to follow as you ask succinct questions.   This procedure does not mean that you are taking an application; you are just being thorough.  You will ask the questions pertaining to your prospect’s health.

Ask if the prospect is married and also seeking coverage for their spouse/partner, if so, request the same information for the spouse/partner.   If possible, speak with the other spouse/partner during the telephone conversation.   Some companies will provide a marital discount for spouses/partners.  If you are told the spouse/partner does not want the insurance, a good E&O risk management procedure is to state this in your letter which summarizes the conversation with the prospect.  A paper trail of conversations with prospects and clients is often the best defense should you ever be faced with an E&O Insurance claim.

Next, ask for the prospect’s date of birth.  Many Long Term Care Insurance sales happen right before an increase in age.  Premiums are lower before the birthdate and some insurers will allow a short window thereafter during which the pre-birthday age may be used for rating purposes.   It is called “saving age” in the LTC Insurance Industry.  While you never want to pressure a potential client into purchasing any insurance product, as every agent knows this type of pressure might cause a future E&O claim, it is something that the purchaser should be made aware of as they may wish to take advantage of the premium savings.

Find out if your prospect is a nonsmoker.  If you learn that the prospect only recently quit smoking, ask when that took place.   The Insurer’s Underwriting Guide is an essential tool to refer to when conversing with a potential client regarding use of tobacco in any form.

Be sure to ask if a prospect is taking any medication.   If so, obtain the names and dosages, the conditions for which they were prescribed and how long they have been taking each medication.  Inquire about hospitalizations within the past 5 years and the reason.

If a health condition is a concern, a good E&O risk management procedure would be to have a conversation with the Pre-Screening Area within the Underwriting Department of the LTC Insurer or their Managing General Agent’s office.   Remember, an agent that promises someone they will definitely qualify for a policy or specific rate class could be creating a serious E&O exposure.

The time it takes to prequalify someone is certainly worth the effort as it may very well reveal health conditions that are uninsurable or premiums that the prospect is not prepared to manage.  In all cases, exercise good E&O risk management by implementing a prequalification procedure and document the results, in writing, to every prospective client.

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