Article 1 - Choosing the Right Broker
The following article was published in February of 2003 and summarizes our core beliefs as your agent.
Choosing Companies To Represent?
Review These Compelling Factors First!
After specializing in long-term care insurance for over 10 years, I feel confident in saying today’s competitive marketplace, most LTC insurance brokers do not recommend policies based on commission earnings. Greedy agents soon discover they will lose business if they do not present a best-case analysis to their clients that is unassailable by any other competitive influence.
So what criteria do experienced brokers use to select carriers with whom to place business? By what criteria are we able to differentiate among the major players and their policies? Below are some criteria I focus on, though not necessarily in this order:
- Policy benefits
- Competitive premium scale
- Company business practices
Examples: rate stability history and claims payment history - Company assets, surplus, financial ratings
- Tenure in business longevity
- Ease of doing business with:
Examples: efficient business systems, agent-friendly, access to underwriters, rapid resolutions
How do I use these criteria? As a rookie agent nearly 10 year ago, I initially focused on policy benefits. These days, it seems that several major policies are more similar than they are different, so product strength isn’t a major differentiator any longer.
Regarding the financial ratings, since I only work with companies in the ‘A’ or above financial rating category, this has also became a non-issue.
Regarding tenure in the business, it certainly helps when seen in conjunction with other factors. However, I must clarify that there are some companies that have been around for many years that I personally wouldn’t recommend.
Regarding ease of doing business, I have found that in those cases where business inefficiency is troubling, I can often times still attain the necessary result simply by doubling my own efforts. The agent friendly aspect is an advantage, but not essential. Access to underwriters helps but, by and large, experience will tell you the viability of a candidate, or not.
Rapid claim resolution (once legitimately approved) is more a matter of procedure and persistence depending on company. Some are rapid, some slow, but most pay in reasonable time.
Since many of the issues addressed above have been taken care of in one manner or another, the one remaining and most distasteful issue that now influences my recommendations pertains to the subject of rate increases, and company stability. Here are my views on those points.
In the early to mid-1990s, there were really only a very small handful of companies that were increasing premiums, and even then these increases were a modest 10% to 15%. Starting in 1999, we began seeing 25%, 40%, and 60% increases, and, most recently, one company announced spectacular hikes of 100% to 350%.
Big rate increases are a very negative energy drain, requiring a great deal of time and distraction from the acquisition of new business. They disrupt established relationships, and permanently strain trust between the advisor and client. The broker is invariably ascribed some of the responsibility in making the original recommendation, and revisiting a subject that was previously decided upon is uncomfortable--especially if present health circumstances make application to an alternative company a non-starter. Even if health isn’t an issue, the very act of replacing a policy is distasteful, and when virtually forced on the client and broker, it raises one’s ire.
Two things have astonished me regarding rate increases:
- Clients hold on to their policies with tenacity, even with increases of 40% or more. When the increases are between 40% and 100%, most often clients elect to downgrade their benefits rather than cancel outright. The majority seems prepared to accept a reasonable rate increase, but people balk at increases that stretch the imagination.
- When increases are frequent and exorbitant, the insurers seem to overlook the fact that their independent brokers, who value their own credibility with clients, will likely cease representing the company. Is the short-term gain worth the long-term loss in credibility and future business? To best represent a company, brokers typically spend a great deal of effort, commitment and investment in learning about the company’s product, underwriting, business practices, claims paying, etc. If a company then pulls the rug out through huge rate increases, it is likely that many will transfer to competitors that have not taken such actions.
Reputable companies do exist that have the assets, surplus funds, ratings, product strength, tenure and acceptable business practices that brokers admire and endorse. Most importantly, they have not raised premiums on unsuspecting, trusting clients. It is to these companies that I steer my clients.
Neville Verster, CLTC
Principal
LTC Insurance Solutions, LLC
Fountain Hills, Arizona
ltcis@earthlilnk.net
