When I first got into the insurance business, I assumed the word "underwriting" simply meant the medical questions that were asked in order to determine if someone could get coverage. I didn't think about how expansive the term "underwriting" was - and how it means much more than a health evaluation.
Don't get me wrong - health is a very important part of determining whether LTC Insurance is a fit for someone. It's helpful to have a guide to underwriting handy such as this one from John Hancock. Asking health questions early in the planning process can help open up or eliminate planning choices.
Undwriting goes beyond health, however. Although the only required financial underwriting in LTC is limited to a suitability form, in reality having an idea of a clients financial situation is very important in order to determine the best planning options. For example, higher net worth individuals may find asset based life/ltc plans preferable to standalone products. On the other hand, middle market consumers need to consider budgets and affordable premiums.
The third aspect of underwriting is attitude towards insurance and planning in general. Carrier buyer research has shown the importance of asking attitude questions. In one recent study two groups of consumers were analyzed with very similar amounts of investable assets - approximately $600,000. Both groups also had similar incomes and health.
However, one group planned to buy LTC at almost twice the rate of the other group. The reason? Attitudes towards insurance and planning.
Although is may seem strange to ask "What is your general opinion of insurance" it might actually be a really good questions to ask of prospects. Of the two groups mentioned above, when asked if "Insurance was an important part of one's financial life" 65% of the more likely-to-buy group said "yes" compared to 29% of the less interested group. Respondants were also more likely to think it was important to plan so not to be a burden to others.
If someone has a low opinion of insurance and is not concerned about being a burden to others - they might not be good prospects for coverage.
Health, wealth, and attitude - if all three aren't okay someone might not be ready to plan for LTC.