Disability Insurance Claim Advice
Gotcha!" (Disability Insurance Claim Management)
Health Insurance Underwriter (National Association of Health Underwriters), November, 1997
By Art Fries
It's time for producers to fight for more honor in the disability claims marketplace. It's not too late for a change.
There's an old saying... "He got caught with his hand in the cookie jar." There are too many hands in too many cookie jars, and it's time to put the lid on this behavior.
It is correct procedure to investigate disability claims and to not pay those that appear to be fraudulent or have no legal basis. However, the long-term implications of questionable behavior on the part of some carriers can cause serious damage to those who create disability products, as well as to those who sell them.
For example, in the last several years a number of life insurance carriers have been sued for management decisions that were not ethical. Some home offices not only tolerated this behavior but turned their head when the obvious was staring them in the face. "Piggyback" life insurance sales (borrowing from the cash value of one policy to pay the premium on another, without proper disclosure to the policyholder) and "vanishing premiums" are just a few examples.
This type of behavior on the part of a number of disability carriers can be economically good in the short run but can have serious consequences on a long-term basis. The good economics are for stockholders, directors, and those in senior management who are compensated for looking good on the claim charts. (And you would, too, if you saw your stock double over a two-year period!) But what about the long-term implications for producers who are getting hurt by this negative behavior, and for the policyholders/claimants who are given promises that are not kept?
There are also claimants left in the path of this improper conduct who have already been economically "buried," or soon will be. And brokers/agents who believed they were providing a financially sound policy from a company with a good reputation are finding their credibility slowly disappearing. Reputations hold up until you get your hand caught in the cookie jar, and there are too many hands in cookie jars these days!
Claims that used to take two or three months at most are taking six to eight months just for a decision; the amount of paperwork is truly disturbing; and when requests for information are made there are long delays so that carriers can earn even more interest "on the float."
Of course there's nothing wrong with requesting an independent medical evaluation (IME) by the insurance company if it's objective and fair, but an exam by a physician who is not a specialist for a particular claim, or one who has no patients but merely a paper trail reputation, is neither objective nor independent.
A call to the attending physician by the home office physician to catch him or her "off guard" or to misquote him or her is another tactic with serious abuse. Unreasonable, harassing video surveillance, CPA visits to the office asking to see records more than a year old, and unannounced visits by local claims adjusters to one's home all add salt to the wound.
So what's the purpose of all these abuses? To wear down the policyholder from an emotional as well as a financial standpoint, with the objective of (a) paying no money; (b) paying a lower percentage on a partial (residual) claim; or (c) securing a "buyback" of the policy at eight cents on the dollar and getting rid of the "reserve" set up on the claim. It's simple economics. When you take in billions of dollars in premium cash flow based on promises made but not kept, it's easy to become a profitable business.
A disability claim consultant is on the front lines. As a former disability insurance salesperson of many years, I'm in demand because of the need for these consulting services and very little competition. My consulting income is secure as long as this unfortunate behavior on the part of some carriers continues. But at my age and state of health, I would rather do less business and see more honor in the disability claims marketplace. There is much loss of credibility that may never be repaired, but it is not too late to try to change, before we fall into the void created by unethical home office claim management.
Some years ago several automobile manufacturers were faced with a major decision. Should they send a recall notice to hundreds of thousands of customers who were driving cars with a defective part, or should they let those thousands of people risk accidents? The end result was that their hands got caught in the cookie jar and reputations were tarnished for years into the future.
NAHU has become a 14,000-plus member organization in part because of a significant interest in producer membership. The money contributed by these producers helped make political changes at a time when many carriers sat back and kept their profits in the bank. It's time for producers to stand up and make themselves heard if they want to bring respectability back to disability claim handling. Let's stop the abuse!