Disability Insurance Claim Advice
How Agents Can Help Their Clients Get Disability Claims Paid
National Underwriter (Life & Health/Financial Services Edit.), November 18, 2002
By Art Fries
It’s never been harder to get a disability claims payment. Carriers and administrators seem to be scrutinizing claims with a higher degree of protection than the Secret Service provides to the president! But this gives you, as an agent or broker, a huge opportunity to learn the disability claims process and help clients secure the payouts they’re entitled to—and to stand apart from competitors.
Today, many carriers have trouble differentiating a "legitimate" claim from a "gray area" claim. A hierarchy of individuals—including nurse practitioners, in-house medical personnel and accountants—is now involved in evaluating claims. Just one wrong answer or wrong word on a claim form or Attending Physician Statement could result in denial or termination.
Proper claim filing.
Before your client submits claim forms or any other paperwork to the insurer, you must know all the facts of the case. Start with a properly worded "Fact Finder" to uncover important details such as medical symptoms and client’s duties.
In some cases, a dual occupation will apply whereby a person can continue working in his or her secondary profession but not in a main occupation. These individuals could be eligible for a partial (residual)—but not a total—disability claim.
You also need to understand the policy language, including the pre-existing condition clause and the incontestability clause. Just because your client has had this contract for two years doesn’t mean he or she will be home free with a pre-existing condition. A contract with a fraudulent misstatement in wording can render the incontestability clause open-ended, prompting the carrier to rescind or modify the policy—and deny benefits even after years of an in-force policy.
Moreover, if you don’t know, for example, that partial disability may follow 60 to 90 days of total disability, your client could be devastated and file an errors and omissions claim against you.
After gathering the facts and explaining the coverage to your client, you need to critique every line of each completed form to ensure accuracy and review any potentially ambiguous questions.
Carriers rarely offer a claimant the opportunity to adequately explain the events leading up to the disability nor the typical day or week before the disability—despite the long list of questions on these forms. That’s why you need to help clients prepare supplemental documents that clarify the key facts.
Physician communication essential.
Most physicians can’t distinguish a disability claim from a workers’ compensation or Social Security claim and receive little or no compensation for the insurer for completing forms that they consider an ongoing nuisance. This is especially true with the surgeons, many of whom disdain the entire disability claims process.
It’s up to you to explain how to communicate with the physician so your client’s rights will not be unknowingly prejudiced. Explain that he or she must get the doctor to fully and accurately complete the Attending Physician Statement or questionnaire. A single mistake on the form, perhaps a doctor’s misinterpretation could mean denial or termination and could cost your client millions of dollars.
One question commonly misunderstood by physicians is, "When is the patient expected to return to work? Sometimes with terms such as "your occupation," "any occupation," "part-time" and "full-time."
Many doctors, with limited time to complete the forms and little knowledge of policy language, often shoot from the hip and wind up submitting inaccurate information. For example, when asked to provide a date that the claimant will be back to work, the physician may erroneously insert the date that he or she will reassess your client.
Doctors may also misinterpret questions regarding "full-time" or "part-time" work status.
Requests for exams and investigations.
Most disability contracts allow insurers to order independent Medical Evaluations (I.M.E.s) by a physician as often as they desire. Many carriers and administrators are now requesting a Functional Capacity Evaluation (F.C.E.), a test performed by a physical therapist. A poor F.C.E. performance may result in denial or termination despite the fact that there is no agreement on whether these tests can accurately measure repetitive movements over time. Still, in some cases, your client may be better off taking the F.C.E.
Before agreeing to or refusing the F.C.E., you need to understand the subtleties of your client’s condition. You also need to advise your client on how far to drive for an I.M.E., what to bring, how to respond to the examiner’s questions and how to get a copy of the test result.
Field investigators, either an employee of the carrier or administrator or an independent contractor, usually visit claimants, sometimes unannounced, but the claimant can select the meeting place. The amount and type of information provided by the insurer to the field investigator will be different for an "employee" as compared with the independent contractor.
Explaining to the claimant what to expect from the field investigator can be very important and determine if a claim is accepted or continued. Advice regarding any handwritten statement for which an investigator requests a signature is also very crucial.
Contesting rejected or terminated claims.
When claims are rejected or terminated because the claimant or the attending physician failed to provide a clear picture of the symptoms, occupational duties, financial issues or other factors, you can contest the carrier’s decision. But be prepared to battle with a well equipped adversary.
In some cases, you may advise your client to seek legal counsel. But clients should be aware that attorneys typically expect 30% to 40% of the potential benefits, plus expenses. So each case should be evaluated individually to determine whether you can avoid involving a lawyer and still get your client’s claim paid.
Evaluating buyout offers.
The carrier or administrator will sometimes offer a lump sum check if your client agrees to surrender the policy. Typically, the amount offered is far lower than the claimant deserves, so your negotiating skills are critical in securing a higher dollar amount. In some cases, clients should be advised to reject the buyout offer.
Many factors determine whether to accept, negotiate or reject a buyout. Let’s take an example of a 49-year-old male client with a disability policy that provides $10,000 a month in benefits. For total disability with a lifetime payout, we can assume a life expectancy of 79. If this life expectancy is lowered by five years due to conditions like multiple sclerosis, the carrier may offer a buyout of $540,000—just 15% of the $3.6 million potential buyout ($120,000 a year for 30 years). But by negotiating just another 10%, you could increase the buyout offer to 25% and secure $900,000.
Before offering a buyout, an insurer weighs factors such as the claimant’s age and the number of paying years left in the contract. If that man was 60, instead of 49, with a benefit payable for only five more years to age 65, the carrier might offer him a 40% to50% buyout. Other factors affecting an insurer’s buyout offer include policy reserves and interest rates.
Many disability claimants, when confronted with the pressure from carriers and administrators—that can go as far as video surveillance—and the fear of economic devastation without their monthly claim checks, accept buyouts that are far too low. As an agent or broker, you need to know when to advise your client to reject a buyout and then help him or her negotiate a fair compromise.
By learning the entire disability claims process, you can offer a critical value-added service to clients and help build long-term relationships. You also need to know when to back away from giving advice on issues that are too complex and instead call upon a qualified consultant or attorney. Regardless, your goal should remain the same: to secure the best possible result for your client.