History of Disability Insurance Denial
Professionals, such as lawyers and physicians often have difficulty finding affordable insurance. The reason is that the industry has had trouble insuring professionals in the past twenty years. In recent years insurers have faced soaring claims and declining premiums.
As a result when a professional becomes injured and disabled, policy benefits may be delayed or denied. In some cases they will only get benefits after hiring a lawyer and engaging in litigation against their insurer.
Professionals should take a look at their disability insurance policies and educate themselves about the tactics many insurance companies use to deny claims.
History of Industry Problems
Starting in the late the 1970s until the early 1990s, disability insurance companies aggressively marketed to professions with favorable risks, such as doctors, lawyers, professors and white collar professionals. Insurers aggressively competed for these clients with good policy payouts and premiums. Many of the policies could not be canceled and had guaranteed fixed rate premiums.
Unfortunately, in the mid-1990s, when many of these professionals
had aged, the insurance companies realized that they had underestimated
the number of claims. Baby boomers were all reaching the 45 to
55-year-old age range and began becoming disabled in large numbers.
The large increase in claims included medical conditions that
the insurance industry had not considered when the policies were
written. Diseases and conditions ranging from carpal tunnel syndrome,
fibromyalgia, chronic fatigue syndrome, Epstein-Barr virus related
conditions, and various mental disorders made their appearance
in a vigorous way in the past twenty years.
As claims mounted several large insurance companies stopped writing disability policies. The remainder of the industry consolidated. Unum Provident, formerly three companies now handles 40 percent of disability insurance policies in the US.
The new policies are not as generous. Often featuring many limitations and exclusions to limit risk exposure, the policies are no-cancel, premiums may be raised in certain situations, benefits are capped at age 65 and they may require rehabilitation programs before benefits are paid. For claims involving certain mental disorders or other conditions the benefits may be limited to two years.
In addition to re-writing the policies, disability insurance companies actively look for ways to avoid paying a claim. It can be difficult for disabled people to get claims paid and to prevent payments from being stopped.
Often disability insurers go too far and engage in bad faith tactics to avoid honoring a contract. Between 1992 and 2002 there have been an estimated 10,000 lawsuits for denial of claims against the largest insurer, Unum Provident. See Sample Cases Page
Making a business decision not to pay can mean a better return.
Since the payout on disabled professional will often run hundreds
of thousands to millions of dollars, especially for doctors and
lawyers, it makes economic sense to deny the claims and litigate
the merits later. Additionally, these tactics will probably often
save the company up to 40 percent even if the case settles.
Insurance companies use a number of techniques to avoid paying
- Using harassing tactics such as repeated requests for independent
medical examinations. Often procuring opinions from people inexperienced
with the medical condition at issue and using these unqualified
opinions to deny the claimed disability.
- Use of detectives and surveillance in an effort to discredit
the disability and deny the claim. This can involve interviewing
co-workers, friends, and neighbors.
- Outright denial of claims involving certain diseases including mental disorders, fibromyalgia, and chronic fatigue syndrome.
- Partial payment on a claim for total disability.
- Arguing the disability is the result of a pre-existing condition.
- Alleging a misstatement invalidates the policy.