Happy New Year! I hope your holidays were enjoyable, and we wish you and yours a very happy and prosperous 2012.
Many people realize too late the voracity of which insurance companies attack insureds’ credibility and practice a policy of deny first, ask questions later. What many people do not understand are the reasons why. Practical business sense says that putting your customers first and practicing strong customer service will keep customer loyalty. Insurance companies follow these rules when selling and updating their insureds’ policies. But these rules are at best only given lip service in the claim departments after a claim is filed. Our first post of the year is going to discuss the reasons behind the change in rules once you’ve filed your disability claim.
Since the late 1970’s, insurance companies actively marketed “own-occ” policies to white-collar professionals. These people were specifically targeted because they were less likely to stop working due to the time they had invested in their education, high salaries, and enjoyment of their careers. These policies, in addition to paying if a claimant could not work their specific occupation, were also non-cancellable, and the premiums were fixed. These policies became very popular! The market became more competitive with more insurance companies offering more attractive measures, such as reducing underwriting standards and lower prices. Other features – coverage without a detailed medical history, no mental health exclusions, lifetime benefits, and 6% cost of living increases – were also added to policies, resulting in a “boom” of sales.
The economic expansion and investment returns during the ’80’s and ’90s enabled insurance companies to invest the premiums from these liberal policies and earn substantial returns. These returns were predicted to continue but stopped after the late ’90s. At the same time, the income for many professional careers grew stagnant and even declined in some specialties, which caused many professionals to reconsider whether they should continue working through their disabilities and instead file for benefits on their disability policies. This sudden influx of claims coupled with the declining rates of return on the invested premiums turned the “own-occ” policies into a very unprofitable field, costing insurance companies millions of dollars.
This lack of profitability caused insurance companies to start focusing on the “management” of these claims in order to make the policies profitable again. Insurance companies started reviewing claims and looking for every and any reason or interpretation of policy language they could use to deny otherwise legitimate claims. Policy forms were revised, and new reasons were constructed to deny benefits. Claim payments were slowed down or even stopped while investigations were ramped up. The methods that came about during this period are well known today to insureds who have gone through the experience of filing a disability claim: lost documents, unannounced visits, field interviews, “independent” medical exams, financial audits, surveillance, and many other dubious tactics.
Insurance companies have realized the profitability of fighting claims, which has developed into its own billion dollar industry. We know – that’s where we were taught all about disability claims and how to “defend” against them. This is why insureds must stay vigilant and why advocates are often necessary to get a disability claim filed properly and benefits paid quickly.
A publicly traded insurance company reports to the stockholders, not its insureds. Even mutual companies construe their attacks as simply defending the interests of their policyholders. The most important numbers aren’t your rightful disability benefits — it’s their bottom line. Claim departments in insurance companies have the resources to come up with excuses to deny otherwise valid claims. Don’t let yourself become one of their victims. If you have questions, please visit our FAQ page. For more information on obtaining help for your claim, check out our services.