Most of my readers here know that I usually remind everyone of insurance “profitability” time periods to be aware of, but some may not realize why I do that, or what it means. September 30 is the end of the third Quarter, and insurers have been targeting claims since at least July. Therefore, allow me to talk a bit more about how important “quarterly and year-end” financial targets are to the insurance industry. Just bear with me, it’s somewhat of a long story.
Most of you know that disability insurers charge “premium” for their Plans and policies, which they then invest in portfolios earning dividend and interest on stocks and bonds. These interest payments reduce the cost of their overall liability with added income. Such investments depend on the credibility of each insurer’s Bond Ratings determined by companies such as Dun & Bradstreet and other financial houses. Bond ratings, resembling individual credit ratings are key.
One of the factors establishing corporate Bond ratings, perhaps the most important, is the expectation of the investment community that each disability insurer is earning profit resulting from good management and growth. The need to show a history of continued profitability and growth is essential to the establish of Bond ratings and confidence in the company is paramount.
Disability insurers pay attention to month-end, quarterly and year-end profitability results. Most “risk management” activities take place after the 15th of the month. Claims are reviewed and investigated beginning in the first month of a designated Quarter. Year-end risk activity begins in October.
Insureds who receive requests for information, IMEs, etc. on or near these time periods, you know that your claim is targeted for denial specifically for a profitability period.
This means that insureds need to pay specific attention to “the QUALITY” of medical and data information provided to insurers. Insurers have a limited amount of time to back-up denials but they have been known to go ahead and deny claims before the deadline whether they have proper back-up or not.
Think. If Reliance Standard denies claims illegitimately by Sept 30th, they don’t really care if they have to overturn the denial on Oct 1st because they still realized the profit in the time period it was needed.
Today, most insureds are only concerned with “getting paid.” I’ve written probably 3,000 articles in 20 years and I can honestly say that the articles dealing with so-called “inside information” are left unread. People want to know only to the extent it involves their benefit payments, and, I’m not saying that’s wrong, it’s just a reality of insurance.
The truth is, though, that I am probably the last “insider standing” who still has a public persona to share these things with you. Therefore, when I remind you of an upcoming “profitability period”, I hope you pay attention. If you want those benefits to keep coming, it’s smarter to know, than not know.
