Houston long term disability attorney Marc Whitehead, Board Certified Disability Insurance Attorney, discusses why disability insurance companies deny claims.
In the 1980’s many insurance companies recognized that there was a lucrative market in selling Long Term Disability Insurance Policies to young, healthy individuals. These policies were designed to insure an individual in the event that they became disabled and couldn’t preform the duties of his own occupation. These non-cancel-able policies often had relatively generous terms with regard to the definition of disability, a life time payout, and a built in cost of living adjustment. However, the lucrative cash cow became a financial nightmare disability insurance carriers such as UNUM, Paul Revere, Provident Life and others. Poor underwriting policies and under pricing in a competitive market led to a massive number of these policies being written on the expectation of substantial investment returns based on the high interest rates at the time.
However, by the 1990’s claims on these disability policies began to increase, at the same time interest rates and investment returns began to drop. Provident Life publicly admitted to the securities and exchange commission that one of it’s principal solutions to its loses was to improve it’s claims handling procedures. This was a thinly veiled euphemism for increased claims terminations and denials. Since insurance carriers cannot control investment returns or the fact that their policy holders where aging and filing more claims they did the only thing that was in their control, refuse to pay claims.
The industry revised a series of measures designed to control claims cost. These included systematically searching for misrepresentations in policy holders initial applications, requiring objective evidence of disability even though the policy didn’t require it, redefining a claimants own occupational standard, using a Federal Law known as ERISA offensively. Use of bias medical insurance evaluations and increased use of video surveillance.
The result of these cost control measures is that, to this date, thousands of individuals that have paid their disability premiums for years have been left in financial ruin because of their own insurance companies broken promises.
