What Insurance Companies Don't Tell You
Disability Insurance Claim Advice
by Arthur L. Fries, R.H.U.
"It's time for producers to fight for more honor in the disability claims marketplace. It's not too late for a change." As published in: Health Insurance Underwriter, Volume 45, No. 10, November, 1997, pg. 15-16
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!
Gotcha! (Part II)
by Arthur L. Fries, R.H.U
"Disability Claims Management Dilemmas"
As published in: Health Insurance Underwriter, February 2000, pg. 22-24
In the November 1997 issue of HIU, I wrote an article titled "GOTCHA!" It related to the need to bring respectability back to the arena of disability claim handling and diffusing the abuses that were occurring at many home offices. I wrote:
"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 same carriers can cause serious damage to those who create disability products, as well as to those who sell them."
Apparently, my pleas fell on deaf ears. Today matters have not become better: they have become worse.
I have sold individual disability insurance for more than 30 years and for the past four years I have acted in the capacity of a disability claims consultant. Most of the people to whom I offer professional advice are physicians, dentists, attorneys, insurance salespeople/financial planners, and corporate senior officers-people in higher income brackets. The largest percentage of my clients are physicians and dentists.
Being on the "front lines" of providing claims advice-from reading claim forms to depositions-has given me a great deal of insight as to the current attitude of disability claim management practices in our industry The amount of paperwork demanded from carriers in response to a submitted claim has become staggering. And the time frame in which claims are now being paid is often stretched out to five to six months or even longer.
I have also noticed that claims personnel are being shifted in something of a "musical chairs" atmosphere-from the lowest to the most senior personnel-at an alarming rate. It seems that once a claims person becomes familiar with a claimant's case, he is shifted elsewhere so that another claims person can provide an opinion- an opinion that often is based upon a scant review of the claim file.
Further, senior executives are nowhere to be found from a communication standpoint. You can write to them, but they seldom respond. The game seems to be "Let's see how much we can wear the claimant (or the attorney) down." This is especially true if there is a lawsuit pending: "If we drag it out, maybe they'll go away"
This cavalier attitude has reached a new high of epic proportions and, on a moral scale, is about five notches down from that of tobacco companies. Granted, not ALL insurance companies are guilty as charged here. Some, based on their claims management actions, do make an effort to be honorable and treat their insureds with respect. Those companies I applaud. Unfortunately their numbers are few.
From my perspective, insurance carriers intentionally go well beyond just the completion of a claim from before they agree to pay on a claim. An insured may have to complete forms that range anywhere from two to 10 pages In length. Many carriers are demanding attending physician statements as well as complete medical records and related notes. Many future claimants can expect video surveillance and CPA scrutiny of their tax returns (could be as much as five years of both federal and corporate returns, and all pages thereof!) A claimant can also expect a visit by a local field investigator (either by appointment or completely unannounced), an "independent medical evaluation" (an exam by a carrier-paid physician) and continual requests for "additional information" to substantiate the validity of the claim.
A disability carrier has a number of defenses it can employ to keep money in their pockets. They include, but are not limited to, the following:
Incontestability preexisting conditions, ERISA, loss of license, dual occupation, "choice" (unwilling versus unable to go back to work), financial gain, activities inconsistent with disability and insurance defense medical (IME).
The current Dl claims management environment indicates a strong desire to control all aspects of the claim by the insurance company Some act as though they want the policyholder to be weakened by their efforts.
Is there a light at the end of the tunnel?
This new attitude on the part of some carriers has naturally created the need for disability claims consultants to intervene between the policyholder, the carrier and, if need be, the attorneys. Although the group is small in terms of numbers, the DI claims consultant, through a forensic approach, may be able to communicate with the insurance company in such a way that the payment of a claim is either accelerated or reinstated. The consultant is an expert. He or she facilitates more response claims management and levels the playing field for everyone affected.
Yet, even if this approach fails in spire of the medical merits or other favorable (valid) aspects of a claim, the independent consultant can help to clarify issues that enable an attorney to proceed with a legal action against the carrier with respect to the claim. Sometimes the consultant can even recommend attorneys who are proficient in this very specialized area of law.
Clearly, claims management, especially in the IDI professional market, has become a big business with big dollars at stake for both the claimant and the carrier. Therefore, whatever you do for yourself or your client, make sure you secure competent advice from those with expertise in disability claims.
What you can expect a DI consultant to do for you or your client? He or she will:
1. Review all disability policies as well as the original application and/or medical exam included with the policies.
2. Review all diagnosis/prognosis reports from attending physicians.
3. Help answer questions on the claim forms or any related questionnaire.
4. Provide advice on how to communicate with physicians with respect to an APS.
5. Determine if a total or partial disability (residual) claim is most applicable.
6. Determine if the claim relates to the policyholder's own occupation, earnings-or both-or some other definition.
7. Provide advice on how claimants should handle visits by claim investigators and CPAs, as well as visits to independent medical examiners.
8. Advise how to prepare a list of pre- and post-disability duties, broken down hourly and weekly.
9. Help to determine what a claimant can and cannot do with respect to postdisability duties, especially if there is more than one policy in-force.
10. Provide advice on the meaning of exclusions, offset provisions, earnings clauses and a host of other contractual terms found in DI policies.
11. Provide advice on whether to bring in another independent consultant such as a CPA or physician.
12. Prepare an overall strategy in connection with a disputed claim to bring about an equitable resolution.