The Truth About Claims Management – A Sunday Editorial by Linda Nee

The TruthMost insureds and claimants view disability insurance as “the benefits they love to hate.”  At first glance, disability Plans and policies appear innocent enough to the point that the public still puts trust in insurers to pay benefits they applied for.

However, the claims process surrounding determinations as to who gets paid and who doesn’t is a financial manipulation that entirely ignores any rational personal, or even human consideration of what medical impairment really is. Basically, disability insurance is more of a financial matter and has nothing to do with you as a person, or the fact that you are suffering from one or more medical impairments.

From my other articles, you should know that when claims are opened a financial reserve is created. The larger the monthly benefit, and longer to maximum duration, the higher the claim financial reserve is. Most claims managers and Vice Presidents have access to financial reserves and have various systems within their units that basically targets claims looking for the “biggest bang for the buck.”

The smallest working division in any insurance company is the “unit”, or “team” headed by a claims manager who is performance managed as to his/her ability to consistently meet executive financial targets. Claims managers who can’t “put up” are “pushed out” of the company. Therefore, it is very important for any claims manager to be able to meet executive financial goals. If they don’t…they’re out!

In fact, the primary goal of any unit claims manager is to meet the company’s financial profitability targets. Claims handlers who work under the unit manager are pushed, harassed, and manipulated to do whatever is necessary to “help” the managers achieve financial reserve goals. Claims handlers do not have the autonomy to make decisions on their own and must have decisions “validated” by their managers who are checking financial reserves and how badly a large reserve hit will affect profitability.

“Validation” gives managers a “look-see” and time to place claims in a pecking order of decision-making that balances approval claim reserves against denial claim reserves so that the bottom line produces profitability. More simply, managers must manipulate decisions within a specific time period so that more denials (or, reductions in reserves) takes place than approval decisions.

Therefore, from the claims manager’s perspective, it is necessary to “manipulate”, and I stress the word “manipulate”, claims approvals and denials based on financial reserves and which combinations of approvals/denials will produce target profits. We all know that at least some claims are approvable claims, but IF managers can hold up those approvals, or slide a few in once in a while amidst a rack of denials, an illusion of profitability can be created. Quite clever isn’t it? It’s frequently all about the timing.

Insureds often ask, “Why is it taking so long for Unum, for example, to make a decision on my claim?” Well, now you know. Even though Unum fully intends to pay the claim, the time manipulation has to be played out before the approval decision is actually coded into the BAS or payment system. If there have been a lot of denials coded recently, an approval wouldn’t hurt too bad, but if there have been no denials, an approval could bump a manager into a very poor performance position. All of the claims managers protect their own behinds first and foremost.

Therefore, we now know there is a great deal of manipulation taking place at the managerial levels to produce what looks like meeting targeted profitability. What this means for insureds is that decisions, even when previously made, are not timely and are often held up in the manager’s office to manipulate financial reserve profitability and show a big win for the managers.

In addition, executive management goes absolutely ballistic when the LARs are above 60%. LAR is an acronym for Liability Acceptance Rate. Premium for disability insurance is underwritten at a 60% payout rate, therefore, when claim approvals exceed 60%, it means the company is in a loss situation. Claims managers are given the word from executive management “to deny more claims”, as Cathy Liston once told her management in CBA (Claims Benefit Administration).

So, does it appear that there is anything about the claims process that has anything to do with medical impairment and the inability to work? What I’ve described above takes place AFTER the claim has been subjected to various reviews, meetings etc., which we also know are “stack the deck” strategies determined at “off sites” managers go to think up. In fact, these “off sites” should really be thought of as executive “think tanks” to devise more and more strategies that produce denials.

If you think about this, there are very few people who have worked inside a major insurance company who will disclose any connection between claims decisions and manipulation of financial reserves. Even when former employees are no longer employed they rarely reveal the “secrets” behind the claim manipulation.

Unum got into a lot of trouble over reserve tampering, so its response is, “We don’t do that anymore.” Yet, Unum employees who are terminated still report to me that financial reserves are well-known within the units and managers still target “the biggest bang for the buck.” Other insurers allege, “We never did that.” In my opinion, other insurers probably do manipulate reserves, they just do it in different ways; perhaps its done further up on the food chain.

When an insurer tells you in a letter, ” We want to make sure your claim receives every possible consideration”, or, “We will make a decision on your claim within 45 days”, or we have forwarded your claim for medical review (that takes 6 weeks)”, you are not being told the truth. The real truth is that the claim is probably electronically being held on some manager’s desk until the financial reserve profitability can be worked out.

The management of disability claims is much more complex than you think since I’ve only touched the surface of lack of fiduciary duty, and fair and objective claim review. Any insurance company that tells you it reviews claims fairly is not telling you the truth.