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NOVEMBER
18, 2002 NATIONAL UNDERWRITER
(LIFE
& HEALTH/FINANCIAL SERVICES EDITION)
How Agents Can Help Their Clients Get Disability
Claims Paid
By
Arthur L. Fries
It’s never
been harder to get a disability claims payment. Carriers
and administrators seem to be scrutinizing claims with
a higher degree of protection than the Secret Service
provides to the president! But this gives you, as an agent
or broker, a huge opportunity to learn the disability
claims process and help clients secure the payouts they’re
entitled to—and to stand apart from competitors.
Today, many
carriers have trouble differentiating a "legitimate"
claim from a "gray area" claim. A hierarchy
of individuals—including nurse practitioners, in-house
medical personnel and accountants—is now involved in evaluating
claims. Just one wrong answer or wrong word on a claim
form or Attending Physician Statement could result in
denial or termination.
Proper
claim filing.
Before your
client submits claim forms or any other paperwork to the
insurer, you must know all the facts of the case. Start
with a properly worded "Fact Finder" to uncover
important details such as medical symptoms and client’s
duties.
In some cases,
a dual occupation will apply whereby a person can continue
working in his or her secondary profession but not in
a main occupation. These individuals could be eligible
for a partial (residual)—but not a total—disability claim.
You also need
to understand the policy language, including the pre-existing
condition clause and the incontestability clause. Just
because your client has had this contract for two years
doesn’t mean he or she will be home free with a pre-existing
condition. A contract with a fraudulent misstatement in
wording can render the incontestability clause open-ended,
prompting the carrier to rescind or modify the policy—and
deny benefits even after years of an in-force policy.
Moreover, if
you don’t know, for example, that partial disability may
follow 60 to 90 days of total disability, your client
could be devastated and file an errors and omissions claim
against you.
After gathering
the facts and explaining the coverage to your client,
you need to critique every line of each completed form
to ensure accuracy and review any potentially ambiguous
questions.
Carriers rarely
offer a claimant the opportunity to adequately explain
the events leading up to the disability nor the typical
day or week before the disability—despite the long list
of questions on these forms. That’s why you need to help
clients prepare supplemental documents that clarify the
key facts.
Physician
communication essential.
Most physicians
can’t distinguish a disability claim from a workers’ compensation
or Social Security claim and receive little or no compensation
for the insurer for completing forms that they consider
an ongoing nuisance. This is especially true with the
surgeons, many of whom disdain the entire disability claims
process.
It’s up to
you to explain how to communicate with the physician so
your client’s rights will not be unknowingly prejudiced.
Explain that he or she must get the doctor to fully and
accurately complete the Attending Physician Statement
or questionnaire. A single mistake on the form, perhaps
a doctor’s misinterpretation could mean denial or termination
and could cost your client millions of dollars.
One question
commonly misunderstood by physicians is, "When is
the patient expected to return to work? Sometimes with
terms such as "your occupation," "any occupation,"
"part-time" and "full-time."
Many doctors,
with limited time to complete the forms and little knowledge
of policy language, often shoot from the hip and wind
up submitting inaccurate information. For example, when
asked to provide a date that the claimant will be back
to work, the physician may erroneously insert the date
that he or she will reassess your client.
Doctors may
also misinterpret questions regarding "full-time"
or "part-time" work status.
Requests
for exams and investigations.
Most disability
contracts allow insurers to order independent Medical
Evaluations (I.M.E.s) by a physician as often as they
desire. Many carriers and administrators are now requesting
a Functional Capacity Evaluation (F.C.E.), a test performed
by a physical therapist. A poor F.C.E. performance may
result in denial or termination despite the fact that
there is no agreement on whether these tests can accurately
measure repetitive movements over time. Still, in some
cases, your client may be better off taking the F.C.E.
Before agreeing
to or refusing the F.C.E., you need to understand the
subtleties of your client’s condition. You also need to
advise your client on how far to drive for an I.M.E.,
what to bring, how to respond to the examiner’s questions
and how to get a copy of the test result.
Field investigators,
either an employee of the carrier or administrator or
an independent contractor, usually visit claimants, sometimes
unannounced, but the claimant can select the meeting place.
The amount and type of information provided by the insurer
to the field investigator will be different for an "employee"
as compared with the independent contractor.
Explaining
to the claimant what to expect from the field investigator
can be very important and determine if a claim is accepted
or continued. Advice regarding any handwritten statement
for which an investigator requests a signature is also
very crucial.
Contesting
rejected or terminated claims.
When claims
are rejected or terminated because the claimant or the
attending physician failed to provide a clear picture
of the symptoms, occupational duties, financial issues
or other factors, you can contest the carrier’s decision.
But be prepared to battle with a well equipped adversary.
In some cases,
you may advise your client to seek legal counsel. But
clients should be aware that attorneys typically expect
30% to 40% of the potential benefits, plus expenses. So
each case should be evaluated individually to determine
whether you can avoid involving a lawyer and still get
your client’s claim paid.
Evaluating
buyout offers.
The carrier
or administrator will sometimes offer a lump sum check
if your client agrees to surrender the policy. Typically,
the amount offered is far lower than the claimant deserves,
so your negotiating skills are critical in securing a
higher dollar amount. In some cases, clients should be
advised to reject the buyout offer.
Many factors
determine whether to accept, negotiate or reject a buyout.
Let’s take an example of a 49-year-old male client with
a disability policy that provides $10,000 a month in benefits.
For total disability with a lifetime payout, we can assume
a life expectancy of 79. If this life expectancy is lowered
by five years due to conditions like multiple sclerosis,
the carrier may offer a buyout of $540,000—just 15% of
the $3.6 million potential buyout ($120,000 a year for
30 years). But by negotiating just another 10%, you could
increase the buyout offer to 25% and secure $900,000.
Before offering
a buyout, an insurer weighs factors such as the claimant’s
age and the number of paying years left in the contract.
If that man was 60, instead of 49, with a benefit payable
for only five more years to age 65, the carrier might
offer him a 40% to50% buyout. Other factors affecting
an insurer’s buyout offer include policy reserves and
interest rates.
Many disability
claimants, when confronted with the pressure from carriers
and administrators—that can go as far as video surveillance—and
the fear of economic devastation without their monthly
claim checks, accept buyouts that are far too low. As
an agent or broker, you need to know when to advise your
client to reject a buyout and then help him or her negotiate
a fair compromise.
By learning
the entire disability claims process, you can offer a
critical value-added service to clients and help build
long-term relationships. You also need to know when to
back away from giving advice on issues that are too complex
and instead call upon a qualified consultant or attorney.
Regardless, your goal should remain the same: to secure
the best possible result for your client.
_____________________________________________________________
Arthur
L. Fries, RHU,
is an independent life/health broker and a disability
claim consultant based in Newport Beach, CA. He can be
contacted at (800) 567-1911
or via www.afries.com.
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