Over the past 15 years, insurance companies have followed an increasing trend of consolidation and product restructuring that has changed the landscape of disability insurance. Changes in philosophy can be traced to the 1990’s when Paul Revere was acquired by Provident, shortly followed two years later by Unum merging with Provident. Another large merger in this same time period was the Swiss Re acquisition of Royal & SunAlliance in 1999. Many companies decided to leave the disability market and sold their existing policies to larger insurers. These acquisitions allowed these large corporations to leverage economies of scale and have more resources aimed at higher but more condensed policy counts in their claims departments.
Large corporate operations have been formed that administer claims on behalf of the many smaller companies that are now owned. For example, an insured may still get correspondence on Provident letterhead but in actuality that letter is coming from a Unum claims department. There are many other companies that use this same tactic. This can enable companies to do business as firms with a better reputations and claims histories, all while pursuing aggressive claim denial tactics.
Consolidation has left agents in the tough spot of having much less competition for the policies they can offer their clients. Twenty years ago, an agent may have been able to obtain ten quotes for a specific case, while now he or she may just be able to obtain two – maybe. This decrease in competition has allowed increases in premiums while agents see little if any of the associated increase in revenue. Consolidation has also taken products out of the marketplace and left captive agents of these former companies scrambling to find alternatives to meet their clients’ needs. Newer technology has also taken away from insurance companies’ relationship with agents, as many companies now sell policies directly to the consumer and bypass the agent. The decreases in competition and income mean that agents are increasingly challenged to continue providing the high quality service and competitive pricing in the disability insurance marketplace that existed not even twenty years ago.
Consumers are also feeling the effects of the industry consolidation as well. From the higher premium levels to a more “robust” claims examination process, insurance companies now have resources that didn’t even exist 20 years ago. Leveraging the increasing numbers of claims, these companies have hired their own in-house doctors, chiropractor, nurses, lawyers, forensic accountants, investigators and other specialists who focus solely on disability claims. At first, this sounds like a great benefit for the insured. The high levels of special handling and expert service, however, end up being used to find reasons to deny claims just as often as they are used to actually help insureds. Professionals who are paid by the insurance companies are trained for their roles by the company and have an incentive to view claims from the perspective of their employer rather than on behalf of the insured. “Independent” examinations are increasingly anything but, and have far too often become an extension of the insurance company.
As insurance companies continue to grow larger, their customers are no longer seen as individual cases but rather as figures for a financial report. Some insurance companies have developed enhanced data on disability claims and established set protocols on how a claim will be handled with little if any regard to the facts of a claim. These protocols have been shown to be more profitable to handle claims even if certain claims have to be forced to fit into a mold. Certain rates of growth and earnings are demanded by the financial markets as performance benchmarks, which may not reconcile with the real life claims and benefit costs. Like most companies, insurance companies have become increasing concerned with the bottom line and base their performance off of analytics without considering all of their stakeholders – not just investors but also agents, employees, and customers.
Consolidation and specialization continue in today’s disability marketplace and show no indication of slowing or reversing. The UNUM Group just announced they are pulling out of the individual income protection market in the United Kingdom. This is in addition to the halted sales of Long Term Care insurance policies here in the United States. Liberty Mutual announced that they are expanding their mid-level group disability insurance products, looking to expand an area in which they’re already a major player. While many financial analysts see these as positive moves in respect to the financial health of the companies, we wonder how this will wind up affecting the customers of the insurance companies when claims are filed. We have written articles on the some of the dubious practices of insurance companies, and these continuing developments make us wonder whether their practices will get any better any time soon.
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