Agents often missing from the loop on life, LTC insurance rate increases

When a longtime client contacted George Pickett this summer about a long-term care insurance rate increase, the conversation left him with lingering concerns.

For starters, Pickett, as the agent/advisor of record, was not informed of the rate increase. Pickett, now a principal with The Centerpoint Group in Madison, Miss., wrote many LTCi policies decades ago.

Many of the past clients are older now, some no doubt battling various mental and physical illnesses that come with old age.

Pickett is pushing for a uniform regulation requiring insurance companies to notify the agent/advisor of record whenever they raise the premium on an in-force policy.

But he isn’t sure that life insurers would welcome the idea.

“If somebody has a severe cognitive impairment and they get a letter notifying them of a rate increase, they may be inclined to throw it in the trash,” Pickett said. “And I frankly think that if the line of business is not profitable, the carrier might like for people to throw it in the trash.”

Pickett took the issue to the National Association of Insurance and Financial Advisors and leaders opted to back the expanded notification. In a Sept. 16 post on its Advocacy Action blog, NAIFA called for changes to client communication.

“When a company is permitted under law or regulation to raise a premium or any expense charge on an in-force policy, that increase should only take effect after timely and clear notice is given to the policyowner, and only when a copy of that same notice is sent at the same time to the policy’s writing and/or servicing agent,” the blog post reads.

Contacted earlier this month, NAIFA CEO Kevin Mayeux said the issue is likely “too narrow in scope” to be a candidate for a model law from the National Association of Insurance Commissioners.

“However, NAIFA will communicate the importance to commissioners as well as engage in discussions with other state lawmakers to ensure policyowners in all states have information and professional support they need to make sound financial decisions,” Mayeux added via email.

Communication breakdown

Bringing the agent/advisor of record into the premium hike can help things go smoother, Pickett said. In Mississippi, and in other states, a premium increase requires approval of the insurance commissioner, he noted. So, it would not be a big step to condition that approval on mandatory concurrent notice to the agent/advisor.

“If the agent receives a copy of that rate increase letter, the agent can contact the insured to discuss it and seek to prevent an impulsive, detrimental act,” he said.

InsuranceNewsNet contacted the top three U.S. life insurance companies by premium – New York Life, Northwestern Mutual and MetLife. New York Life "communicates directly with policy owners and agents regarding changes to their policies," a spokeswoman said.

Pickett's client has a MetLife policy. MetLife no longer offers individual life or long-term care insurance to new customers in the United States, but MetLife Holdings continues to service in-force policies. It is standard business practice for MetLife to send the servicing agent of record an advance copy of premium change notices and notify them of other significant policy activity.

While that is the MetLife policy, Pickett said it isn't being routinely followed by third-party providers. Pickett shared a June email exchange with a TPP servicing the MetLife policy. In it, the account representative explained that premium increase information is only shared with the advisor/agent of record upon request.

"Because plan details, rates, and applicable information can change, issuing them upon request helps ensure that what is provided is up to date and relevant, rather than sending materials automatically that may no longer apply," the account rep said in the email.

But if the agent doesn't know the insurer has increased a client's premium, Pickett said, how would they know to request that information?

Northwestern Mutual did not respond in time for this story.

Big stakes for policyholders

States do require eventual notification for LTCi policies based on the NAIC’s “unintentional lapse” provision contained in its Long-Term Care Insurance Model Regulation. Insurers must allow applicants to name at least one secondary person to receive a backup notice of termination for nonpayment.

Federal law mandates that for any long-term care insurance policy to be considered a "tax-qualified" contract, it must explicitly satisfy the consumer protection requirements of the NAIC regulation, specifically including the unintentional lapse provision.

With straightforward life insurance, it’s another story.

That lack of secondary notification nearly had devastating financial consequences for an 82-year-old Chicago woman earlier this year.

Dolly Janowiak had her $100,000 life insurance policy canceled by Transamerica after she accidentally missed a $56 monthly premium increase. CBS News Chicago was the first to report the story.

Janowiak lost her long-held coverage in April following a notice from the insurer stating she had failed to pay the increased premium amount for two months, resulting in a $112 delinquency. Her family contended that she never received any warning notices mailed by the company.

"What about all the money that I spent on it?" Janowiak said in an interview with CBS News Chicago.

Her son, Greg Janowiak, said his mother had paid her policy "religiously every single month for 20-plus years." He added that because of her age and current health struggles, the cancellation effectively left her uninsurable.

Transamerica reinstated Janowiak's policy after CBS News got involved but mandated a $1,581 payment to restore the coverage.

In a statement to Moneywise, Transamerica cited privacy policies preventing them from discussing specific policyholder details. The company stated they contacted Janowiak directly to resolve the matter so she could maintain her coverage.

Janowiak died Oct. 4.

State notification rules vary

InsuranceNewsNet contacted insurance regulators from the top 10 most-populous states in the United States to gauge how states handle notification of premium increases. The ten states – California, Texas, Florida, New York, North Carolina, Pennsylvania, Georgia, Michigan, Ohio and Illinois – are home to roughly 184.8 million Americans.

Only the Georgia Office Of Insurance and Safety Fire Commissioner did not respond to multiple messages.

Policies vary greatly and not always along the expected ideological lines. For example, a spokesman said New York has no requirement for an insurer to notify the agent/advisor of record when raising a client’s life insurance premium payments. New York is generally recognized as a very policyholder-friendly state.

The California Insurance Code does not require notice to the agent/advisor of record when premium increases. However, an individual life policyholder can designate at least one person to receive notices of a lapse or termination for nonpayment of premium.

Highlights from other states include:

Florida: The insurer is required to send a copy of any lapse notification to the agent/advisor of record at least 21 days before the effective lapse date. The requirement for secondary lapse notifications applies to life insurance contracts in force for at least one year and cover a person aged 64 or older.

However, an insurer is exempt from this requirement if they provide an online portal for agents to track policy status, maintain a system confirming notice transmission, have no record of the current agent, or if the agent is a direct employee of the insurer.

Pennsylvania, Illinois, Texas, Ohio, Michigan and North Carolina: No law requiring agent notification of an impending life insurance premium increase.

‘Nowhere to turn’

NAIFA President Christopher L. Gandy called the lack of consistent agent notification a real and persistent gap in the regulatory landscape.

“When an agent is left out of important communications, a policyholder who receives notice of an increase has nowhere to turn to understand what the change means, how it affects the policy’s long-term outlook, or what options may be available,” he said.

“The result is that consumers are often forced to interpret the correspondence on their own, at precisely the moment when professional guidance is needed the most.”

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.