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| Lawrence I. Geller: DISABILITY, WHAT REALLY COUNTS. |
Over the past few years a number of agents have contacted us to discuss the merits of various disability insurance policies. Each wanted to know what we looked for in a disability contract that we recommended to clients. To each our response was much the same. We look for a contract which will pay our clients a benefit in the event that their ability to work is interrupted by a disability, whether physical or emotional, no matter what the cause or degree of disability.
Fortunately much has been written in the past several years about the evaluation of disability contracts. More and more, insurers are aware that, in order to be competitive, contracts must cover partial and progressive disabilities without the precondition of total disability. This includes a need to recognize that many disabilities are intermittent and that, even during the elimination period, contracts must allow a client to continue to accumulate days of disability. Recently, some group and association L.T.D. contracts have become superficially similar to the best individual policies. Many appear to allow for the accumulation of non-consecutive days of disability. Partial disabilities appear to be covered. Progressive disabilities seem to be included in the definition of disability. Yet the policies are, in reality, much more restrictive than individual D.I. contracts. They often limit the types of disability for which days may be accumulated. Equally they often limit severely the number of days that an insured individual may return to work during the elimination period. Offsets in these L.T.D. contracts are often extensive and may now include benefits from individual policies as well as from other group, creditor or association plans; income earned in any occupation and income continuation plans; the activation of retirement and pension income (to which the employer has contributed); payments from governmental plans; etc.. Each of these limits the payments required from the group insurer and thus the amount actually received by the client. If a client pays for a benefit, that is the amount which they feel that they should receive. And they become frustrated when they receive far less because of these offsets. But, far, the most important aspect of a disability contract is the intention of the insurer to pay benefits. Many may claim such an intention, and tell clients that regardless of the wording of the policy contract they will pay all claims, but if that were the case, would they not agree to word their contracts accordingly ? Other insurers write that their contracts are "just as good as" the best individual policies, or worse yet, "have many of the features of" the best individual policies, "but at much lower premiums". These are interesting contentions, but we all know that you get what you pay for in life, and this includes insurance. These same insurers provide their policies at lower initial premium costs than the policies with which they compare themselves. It is interesting to note that these LTD premiums are not guaranteed and are based on the age and gender of the members of the insured group and will change as those factors change or as other factors such as the experience in the insurer's block of business change. These insurers assert that their pricing is due to a lack of sales force, or more efficient handling of claims. The first means that a purchaser is often on his or her own in determining the merits of the contract. This means that they have to read the policies (a difficult task even for those who have great experience in this area) or promotional packages (which do not in any way provide complete disclosure) and from these make a decision about the value of the coverage, to them. They have to submit their own claims, with all of the evidence required, based upon conversations with clerks at the other end of a telephone. For many of these insurers customer service means an 800 number. The disabled are seldom in a position to properly submit their own claims, let alone accurately and as required to fit into a formula developed by an insurer to facilitate the jobs of underpaid clerical staff, particularly since some of the "advice" meted out on these call lines is, at best, erroneous. Those who have worked on claims for clients know that, once an insurer has received information regarding a claim and made a decision based upon that information, it is almost impossible to get them to look at new evidence. Imagine how difficult it would be for the claimant to get this done. Poorly completed forms are not of help to a claimant. If this is one of the ways that an insurer can become more efficient in handling (i.e. reducing) claims, I am against it. Price is not the issue here, benefit payment is. Insurers must, when developing policy contracts, properly determine the premiums required to assure that claims can be paid, without financial loss to the company. They must also factor in the cost of education in policyholder service for their clerical force. When we deal with these clerks we often become frustrated. When clients deal with them they become annoyed and distressed, as though they didn’t have enough problems just dealing with their disability and the inevitable changes in lifestyle that result from a disability. For years we, as agents, have worked very hard to establish our credibility and that of the products which we sell. Now insurers are, in the pursuit of profitability, and after a decade of price competition which they themselves generated, restricting their policyholders rights to claim benefits, and annoying the insured public in the process. Don't misunderstand, I am in favour of the sale of group L.T.D.. I think that it has a place in many corporate plans. I am even in favour of association and franchise group, provided that it is not misrepresented by the selling insurer. I am against the products for which insurers fail to make full disclosure. Insurers often seem to feel that the worst that can happen is for the client to sue (if they can afford to after they are disabled) and maybe, eventually, after years, win the benefits which they were entitled to receive based upon the representations of the insurer at the point of sale. And that isn't what most of our clients want from their disability insurance coverage. |
| (c)Geller Insurance - Insurance Plan Design & Administration, Claim & Litigation Support. Tel: 905-854-4114 |
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