LTC Discounts vs. Rebating


100+ Post Club
The following issues appear to be appropriately addressed as part of market conduct:
1) Discount (often 10%) offered on purchase of a second individual contract by the spouse. The discounts affect individual coverage based upon another individual contract. As these are issued on individual policies, this conflicts with the entire contract provision. It is also an unlawful rebate resulting in unfair discrimination, as the rate differs for two otherwise identical individuals of the same risk class.

The 10% savings can be actuarially justified, but the purchase requirement is illegal. This is more appropriately done via issuance of a joint contract. Or, the insurer can underwrite both spouses, not require both contracts to be issued to get the discount.

2) A discount is offered for groups of individual policies. Issuance of a list-bill policy for less premium than the same individual would otherwise be charged would be unlawful unfair discrimination, and an unlawful rebate. Fair discrimination is based upon actuarial risk classes, not expense or commission differences.

If this were done via issuance of a group contract, it seems appropriate.
10%, GE's discount is 40%, they pretty much price themselves out of the market for singles. What is your point?
JMO I assume you are referring to tie-in sales which are illegal in most (if not all states).

Also, most states prohibit rebating.
Actually, multi-policy discounts are standard, especially with P&C policies. Even in health, you stop charging more after you get past a couple of children.

If it's approved by the DOI and is actuarilly sound, it will fly and is not rebating. I'm sure they've been able to show the cost of writing and maintaining a couple for LTC is at least 10% less than writing individual.

Most DOIs don't look at rebating (or unfair discrimination) in filings. They wait for market conduct exams. Approval by DOI just means you can sell, not that everything in it is legal.

LTC claim costs are about 10% lower for married people. Insurers can offer 10% off if a person is married (i.e., living with spouse), if they don't insist on sale of the second policy. But they can't offer a discount based solely upon sale of a second policy--that's rebating.

Suppose Mr. Jones has a single LTC policy from XYZ Co. Agent from ABC Co. sells a single LTC to Mrs. Jones. Each should get 10% off.

If ABC is caught replacing XYZ policies for a discount, the state DOIs will get complaints from XYZ agents about twisting, rebating, and unfair discrimination until ABC quits.
Last edited:
Rebating/discount/unfair discrimination laws apply to LTC & life/health differently than P&C. P&C laws push discounts for multiple-line coverage, especially where coverages might overlap.

Life & health insurance laws don't allow expense/commission differences to be passed to the consumer. These laws were initially adopted to prevent 'big' clients from getting a better deal than 'little' clients when the risks were the same. LTC risks are measured on individuals, who are supposed to be charged the same rate by health risk, not size or affiliation.

For a husband & wife, joint coverage has always been considered under the same life/health laws as individual coverage (rather than group). If their policy is issued jointly, a rate 10-40% below the rate for two individual policies could be justified (without violating rebating or unfair discrimination laws). If one of the two doesn't want coverage (or doesn't qualify), the company might still justify a 10% discount on the individual policy, as long as there is no requirement to buy a 2nd individual policy.

Some carriers just issue two policies with discounts. If living with or being married to each other is the only requirement, this could also be justified, if the discount is based upon risk factors (i.e., not commissions or expense savings). It wouldn't automatically violate the law if the 2nd purchase isn't required.
Last edited: