After over twenty years of trying to inform the general public about disability insurance products, it’s still pretty clear that a lot of people are still left shaking their heads. After countless articles about disability plans and policies, it is still no different today than two decades ago.
Employer Plans (ERISA) are contracts of “adhesion”, meaning claimants have no, or little say about what’s in them. Since Claimants are not direct parties to the Plan document, they are referred to as “Claimants” or “Participants”. Although judges are supposed to give some deference (consideration) to ERISA Plans, I’ve seen little evidence of it over the years.
A characteristics of all disability insurance products is that insurers earn profit when claims are denied, not paid. Therefore, how is it possible to reconcile “fiduciary” duty with profit self-interest of the corporation? Surely, it is impossible to equalize “acting in the benefit of claimants” while at the same time attempting to deny as many claims as possible.
Likewise, for the IDI profit insureds buy for themselves, the concept of “good faith and fair dealing” can’t be reconciled with “deny as many claims as possible.” Insurers are always struggling with the invention of different strategies that make it easier to deny an IDI claims.
The typical situation for an ERISA claimant, perhaps a secretary, or IT worker, is that although ERISA requires employers to provide copies of the Plan as soon as employees enroll, most employees are NOT provided with copies, at best only SPDs, and they never know exactly what they have, or the limitations of it. They believe “they are covered” until the bottom falls out with a disability.
Although IDI insureds always believe they are covered with a “better than sliced bread policy”, they are completely unaware of the impact of “residual” provisions and riders that make own occupation null and void.”
In addition, the federal government gives ERISA insurers “discretionary authority” to decide who gets paid and who does not. Insurers also have discretionary authority to interpret the Plan document. Do you really think that insurers with this kind of authority are really going to act the “fiduciary” role on your behalf? Of course not.
The truth is, that disability Plans and policies are NOT designed for the benefit of employees and individuals, but are intended to only be stopgaps to get people “over the hump” before returning to work.
Disability policies are not, and never were intended to “help” workers. Therefore, these products should NOT be trusted to provide financial security long term.
