“I’m Older And I Want Life Insurance” …I just can’t remember why.
Or so goes the home office joke. But when your client is declined for life or long term care insurance coverage it’s no laughing matter—especially when the case is larger or when the decision is a shocker because the reason was cognitive impairment.
Why the recent excitement about seniors and life insurance? Right now, many agents and clients are realizing that some modified endowment contracts (MECs) (as well as many annuities)—especially those with accelerated living benefits—accumulate cash and are tax deferred.
Products exist that return 3 percent or more, net of mortality costs, with positive cash surrender values even in the first or second year. Plus, they leverage the money for critical and chronic illness.
It’s not just about wealth transfer anymore. If a senior client has a large, unexpected medical expense, there may not be much left to transfer. Accelerated death benefits for both chronic and critical illness are here—and just in time.
Along with senior life insurance, though, comes senior underwriting. More than 10 percent of people with mild cognitive impairment will develop real dementia each year compared to only 1 or 2 percent of a control population.
So, now it’s time for the exam and you find that it will include some type of cognitive impairment testing for your client. Don’t be surprised that there are several widely used tests.
Many major brokerage companies are using these tests, and the ones with no formal testing are fully aware of the issues and take them into consideration when underwriting a case.
Primary Cognitive Impairment Tests
There are a number of tests used to diagnose cognitive impairment and the onset of dementia. The criteria are that the tests have to be reliable and useful, can’t cost a lot of money, should not be intrusive, and should not have to be done by a professional. There are a half dozen tests that fit these standards, most of which are accompanied by an activities questionnaire.
The Clock Test. While there are many variations on this test, they all involve the client drawing a clock face. The client is either given a blank piece of paper and asked to draw the clock, or given a pre-drawn clock face—most variations ask the client to draw the hands denoting a certain time. The time 11:10 is often used as a trick question because of the “pull” of the number 10 on the clock. This test usually takes just a few minutes.
Sounds simple doesn’t it. However, you wouldn’t believe the variety of results. Underwriters look for 15 or 20 indications, including how many numbers are in each quadrant; whether the numbers are evenly spaced; the position of the number one; whether the hands are of equal length; whether the numbers 1, 2, 4, 5, 7, 8, 10 and, especially 11 are correctly placed; and whether the numbers are all inside the clock.
This test includes spatial ability and reasoning, but could easily be a problem for people with visual impairment or trouble holding the pen. The client’s education should not be a factor here. This test is sometimes thought to be weak on mild cognitive disease. But you would still be amazed at some of the clocks underwriters see.
The Delayed Word Recall Test. This one is quite common and is part of another widely used test called the Minnesota Cognitive Acuity Screen, which has been widely used in long term care testing for years. It was developed especially to facilitate the early diagnosis of Alzheimer’s disease.
The test is pretty simple. An examiner gives the applicant being tested a list of 10 words and asks him to use each word in a sentence. Then after a delay of 10 minutes (often a timer is used), the examiner asks the applicant to repeat the words until it is clear that he is unable to continue. The score is based on the number of words recalled. Most people can repeat seven to nine words without a problem. If the person being tested can get only half, that is a sign of a problem.
There is also a connection between scoring on this test and senior depression. Almost half of those taking this test could be misclassified as having dementia based on their word recall scores if they have depression. Thus, some experts conclude that this test is not specific enough by itself to clearly tell whether a person has early Alzheimer’s as opposed to major depression issues.
Note that a person might score low on this test and yet be able to perform every typical daily function—driving, paying bills, balancing a checkbook and traveling. Yet, should someone have Alzheimer’s, an early diagnosis could be important, since there is irreversible loss of functioning for every month that mild to moderate disease goes untreated. (More than two-thirds of Alzheimer’s patients are diagnosed after they already have moderate dementia.)
Another major problem with this test is that someone who isn’t proficient in the English language could be misdiagnosed.
The Get Up and Go Test. This is a functional test that primarily measures a person’s motor skills and balance, yet it can also provide some insights into cognitive abilities such as responding to commands.
The test consists basically of asking the client to get up from a chair, walk a certain distance, return to the chair and sit down again. It can be used to test for possible stroke, Parkinson’s disease, cerebral palsy and other functionality issues. This test is used with the activities questionnaire which outlines the client’s general fitness and exercise.
People who exercise are generally more accommodating to change, more optimistic about life and recover from minor illnesses quicker—and have longer life expectancies.
The Alzheimer’s Quick Test. This is an easy test to administer and score, is free of cultural biases, but isn’t that widely used. The person being tested is asked to identify colors and shapes (such as animals). We can guess why this test isn’t widely used—it was available on a medical website for $230 but has now been discontinued.
The Mini-Cog Tests. These rapid screening tests for Alzheimer’s disease take only three to five minutes to administer. They include only two tests: recalling (only) three words and a clock drawing. While purportedly very accurate, they score a person as demented if he recalls none of the three words or if he recalls one or two of the three words and draws an abnormal clock. This may be a good indicator, but it’s too rudimentary for use in the insurance business.
The Minnesota Cognitive Acuity Screen (MCAS test). A few companies use the MCAS test, which claims to be 98 percent accurate in detecting cognitive impairment. It’s normally used at age 71 or older. It’s simple and involves a short, non-threatening phone interview—though it can be done in person as well.
Trained nurses conduct the interviews and the turn-around time with results is quite short with electronic test results. Most people think it’s more simple and straightforward, plus it doesn’t involve any “get up and go” testing and delayed recall tests which, reportedly, can be 10 percent inaccurate.
The MCAS test is accurate with an error rate of less than 2 percent. The test involves 15 minutes of questions and answers about a client (name, address, birth date, day of the week, how he would handle various emergencies, a six-digit number recall, and word recall—remember as many of 10 words as possible). The client might also be asked to tap on the telephone when instructed. In 2005, the Society of Actuaries reviewed the test favorably and today, more than two dozen carriers use the test in screening for LTC insurance.
What Does All of This Mean?
These studies prove fairly conclusively that people who score poorly have a much higher mortality experience than people who score well. The delayed word test in particular shows that, as people get older and older, the mortality savings to the insurance company increases. The savings is so significant that the costs of testing might need to be in the tens of thousands of dollars to outweigh the benefits. Obviously these tests don’t cost anywhere near that.
Attending physicians and even family members are notoriously bad at spotting the onset of dementia. According to the Society of Actuaries, doctors often don’t note cognitive status in their files and often miss the problem in 60 to 80 percent of cases.
More and more companies are implementing cognitive testing, with many using multiple tests—usually including the delayed word recall test and the clock drawing test. In the future, we can expect this trend to continue—with the best companies that have the best products including these tests. And, as companies continue to assess the effectiveness of these tests, more and more will get involved, combining traditional medical underwriting with criteria that measure frisky versus frail.
With better knowledge about senior life underwriting coupled with the fact that LTC insurance sales are lagging, many agents are now recommending life insurance policies with accelerated benefits. The cases we see are often single premium MECs, with accelerated benefits. The premiums are often $100,000 and the applicants are often women.
Know the products, know the underwriting, but don’t sell just the products—sell the solutions.
who is manager of Carrol & Associates, Inc., Eastern Washington office, has 35 years experience working with life insurance agents, financial planners, stock brokers, and property and casualty agents.