Why you shouldn't fear a LTC insurance rate increase conversation

Image source: Flickr user FutUndBeidl

Although inforce LTC rate increases are less frequent than they used to be, it's still a major topic with advisors and consumers. In fact, I wrote about my experience with my policy rate increase just a few months ago.

Not surprisingly, many advisors dread making a phone call to clients to discuss a LTC Insurance increase letter from a carrier. In my frequent conversations with advisors asking about how to deal with the rate increases I have developed a few talking points that can be used with consumers to help them make the best decisions. Here's a rundown:

1. Be empathetic.  Although we know the reasons for rate increases are justified due to a low interest rate environment (among other factors), the initial reaction should be to allow someone to vent and keep them from making a poor decision such as dropping coverage while emotions are high.

2. Go back in time. Revisit the initial reason for the purchase and why planning for care is important. Talk about the factors that went into choosing a particular product at that point in time and why it was a sound decision.

3. Make them aware of current product premiums. Run some current premiums for clients - even using their original issue age - to show them what a smart decision they made.  Remember, their increased premium will not be more than what is available from the same insurer today.  You can easily run quotes online using quote calculators like this from Genworth.

4. Consider Options. Once a policyholder has calmed down they can make rational decisions about their current coverage.  First, confirm they want to continue with the current policy - replacements are rarely a good choice.  Next, compare the current benefit levels with the current cost of care - frequently I've found their policy has actually outpaced LTC inflation. In this case most plans allow a reduction in in-force benefits that will keep premiums similar to current levels.  

Finally, before a decision is made, make a projection of how the plan will perform when care may be needed. As I discussed in a recent interview be very cautious if removing inflation protection - some carriers will reduce the benefit back to the original level!

Nobody likes the unexpected, but most people who purchased policies understand that - it's why they bought protection in the first place.  I found that well prepared advisors can actually turn the difficult conversation about rate increases into a positive experience that demonstrates their value to the client.

Want to learn more?  Check out this slide presentation on what people need to know about LTC rate Increases