An article in the March 27, 2007, issue of The New York Times describes the practice of some insurance companies setting up bureaucratic barriers to the filing of claims for coverage in order to save money. The article focused on three companies, Conseco, Penn Treaty, and Banker's Life and Casualty, which appear to purposely create roadblocks to coverage claims. Complaints about Conseco number one for every 383 of its policies, which is a whopping 32 times the rate of complaints received by the largest long-term care insurance provider, Genworth Financial. Penn Treaty receives complaints at a rate 10 times that of Genworth.
We recently had a client with a related issue, the practice of insurance companies to terminate policies if the premium payment arrives late. Our client had been hospitalized when the premium was due and her niece had the bill paid after collecting mail from the client's home. The client received a check back from the insurance company saying that payment had arrived late and that therefore the company could not reinstate the policy.
A review of the policy itself indicated that this form letter misstated its terms. In fact, the insurance company had discretion to reinstate the policy despite late payment. I explained this to the person I reached at the company, who was unmoved by my arguments. So I asked to speak to his supervisor.
She was quite pleasant and said she would look into the matter and get back to me, which she did. Her investigation revealed that the company had in fact received the client's premium check on the last day of the grace period, which happened to be a holiday, so the check was deposited the following day, which was the reason the policy was terminated. She reinstated the policy.
The good news in this story is that our client still has long-term care insurance coverage and the company responded reasonably after not too much trouble -- unlike the stories described in the Times article at other companies. However, the insurance company made a mistake, then sent a misleading letter, and did not respond to the first call for reconsideration. A frail, elderly policy holder may not have persisted and had the results we achieved.
The morals of this story? Be persistent. Get help. Don't by a policy from Conseco, Penn Treaty or Banker's Life.