Barry J. Fisher Paradigm Insurance Marketing

Financial planning televangelist Suze Orman is making headlines but not the kind she’d like. She and CNA are being sued by the children of a deceased client.  The facts of the case are sketchy (as they usually are when reading magazine articles) but it would appear the complaint revolves around ambiguous brochure language pertaining to payment of policy benefits for family caregiving. Additionally, because Orman promotes herself as a financial planning “guru” she is being held to a very high standard.

This first issue is as old as long-term care insurance itself.  For some reason many insureds and agents have the misguided notion that sons, daughters, spouses, etc. are the best qualified people to provide care.  Forgetting the merits of this notion for a moment, with the exception of expensive cash benefit policies, the vast majority of LTCi products have never allowed for payment of benefits to family members regardless of their qualifications.

The problem occurs when agents and insurance companies do not just come out and say this. They’re afraid this simple fact will cause some consumers not to buy a policy. Instead they talk around the issue instead of (1) making the case that qualified third party providers are generally the best caregivers or (2) that family caregiving  benefits are available if the insured is willing to pay a premium two to three times higher for “cash”.  For too long carriers and brokers minced words and indirectly implied a benefit feature that doesn’t exist. This is the case in this matter.

According to various news reports the crux of this case is as follows:

1. The CNA brochure stated: “caregivers cannot be a member of your immediate family living with you.”

2. The actual insurance contract stated caregivers cannot be “any family members.”

On the face of it you may think this is strictly a CNA problem. However, it appears that Suze over-promised and under-performed.  The complaint against her stipulates “Orman’s declaration that a person’s financial adviser has the obligation ‘to make sure you understand all the ramifications of the policy.’“ [1] If true, Orman has established a duty and responsibility that no one could attain in regards to any insurance policy or investment vehicle.  And, regardless of the truth of these charges, Suze’s high profile places her squarely in the crosshairs of a disgruntled consumer and the plaintiff’s bar.

I’m no great fan of Suze Orman or CNA for that matter.  But this story provides all of us with a great many lessons that should be obvious.  One should not be however, that you stop selling long-term care insurance.  If you come to that conclusion, you should find another career that does not allow any contact with the end user of a product or service.

The conclusions I reach are as follows (and these apply to ANY type of insurance policy):

1. Be careful what you say. Don’t make promises that are not clearly outlined in the policy documents.
2. Be clear as to your representations of what the product or service does regardless of representations in brochures; read outlines of coverage and specimen contracts.
3. Understand what the client is really after; do your homework.
4. Get the client engaged in the choices and cost-to-benefit trade-offs they will undoubtedly make.
5. Document your discussions with clients in case they are deceased when questions arise and you’re dealing with unhappy heirs.
6. Make sure you have a good E & O policy that covers prior acts and defends you against a litigious plaintiffs bar.

Considering the number of long-term care insurance policies that have been sold over the decades there have been relatively few lawsuits. Let’s also keep in mind that independent surveys (one of which I wrote about in one of my early Blogs) points to high consumer satisfaction with LTCi claims payment and the services that insurance companies provide families at time of claim.  We should all be proud of the protection that we’ve put in place over the years and need to continue to inform prospects and clients of the looming personal long-term care crisis that they face and their need for appropriate planning and protection.

Have a great weekend.

barry@paradigmins.com