Clients now seem to spend more time fighting to get them.

Perhaps you saw the 60 Minutes coverage on UNUM in the fall of 2002? It highlighted the problems some UNUM policyholders were having collecting benefits in disability circumstances that seemed at least on the surface like slam-dunks. One case highlighted was that of John Tedesco, an eye surgeon who injured his back lifting a golf cart, and who also had Parkinson's disease. UNUM denied his original benefit claim. 60 Minutes implied that UNUM had all of the information it needed; UNUM's position is that once it later received a definitive diagnosis of Parkinson's, it paid the claim immediately.

This show, which some wags have dubbed 60 Depressing Minutes, left the viewer with the impression that UNUM in particular and the disability insurance industry, as a whole, is playing games-and that they're doing everything in their collective power to deny claims, legitimate or not.

Is it true? That will be your call after reading what follows. The point is that maybe you should start pitching this risk management solution a little differently to your clients. They may be someday fighting for benefits they feel entitled to by virtue of years of premium payments-benefits the carrier doesn't agree should be so readily forthcoming.

Talking to industry participants about this story reveals Mars-vs.-Venus-style differences of view. Disability agents cite largely benign encounters with insurers. Yet many financial advisors know at least one client who's experienced an allegedly unfair claim denial. UNUM says it uses an irreproachable claims evaluation process, yet independent consultants have serious doubts.

John Ryan, a familiar face at many planning industry conferences, operates Ryan Insurance Strategies in Englewood, Colo., and maintains he's had no trouble with the claims he's helped clients process, nor has he seen problems with his insurance associates' claims. "Insurance companies must look initially at denying claims because many aren't legitimate, either because policyholders are trying to take advantage of the system, or they simply don't understand the language in their contracts," says Ryan.

Kim Natovitz, owner of Long Term Care Planning Services Inc. in Bethesda, Md., shares Ryan's perception: "I personally have had positive claim experiences with UNUM. However, the cases have been cut and dry and the claimants have not been self-employed, which makes a big difference."

Unlike agents, financial advisors are skeptical. Many have horror stories to relate, like Fred Meyer of Meyer Financial Planning in Punta Gorda, Fla. Meyer tells a rather convincing tale of a 43-year-old dentist: "He [now] has an obvious and severe disfigurement of his right hand. He can't perform the material duties of his own occupation, for which he is insured. The disfigurement doesn't prevent him from playing golf, and he's quite good at it. After being followed, observed and videotaped, his claim was denied. His disability insurer has interviewed friends and former employees, and they all support this dentist's claim. Employees have seen him writhe in agony and cry real tears. He'll drop crowns on the floor because he can't grasp them properly. These disability companies don't care who they screw. They just want to get even for the times they have been cheated in the past and they don't care how they do it."

Meyer, now a fee-only financial advisor, was once an agent who sold disability insurance "in good faith for a lot of years." Now, he scoffs at the sales materials the big companies produce, as he says, "to make the consumer feel like they would really protect you. Baloney."

Diane Pearson at Legend Financial Advisors Inc. in Pittsburgh, has a client who she says will probably file a lawsuit against UNUM. Three years ago, the stress of this radiologist's work caused almost life-threatening high blood pressure and a deterioration in his health. He started to get benefits from UNUM that lasted through the summer of 2002, when they were discontinued.

"My client went back to UNUM, [and] requested a copy of their findings from the interviews they had conducted with his psychologist and primary care physician, to see how they substantiated the discontinuance of his benefits," says Pearson. This led to a finding by the client that the psychologist had been misquoted, to UNUM's advantage. That's where the case stands for now. A simple mistake on the part of UNUM's claim examiner? Maybe. But the client wonders if the facts his policy gives him lifetime benefits and he hasn't shown a continuing deterioration in health beyond his initial disability has had a bearing on UNUM's position.

Finally, Larry West of West Financial Consulting Inc. in Huntsville, Ala., cites the case of a friend who experienced what he terms "sudden death." "Her heart stopped and had to be shocked back six times before reaching the hospital. She was a teacher, and the school system put her on disability retirement. The documentation I developed for [a claim against her large disability insurer] was also sent to the Social Security Administration, which approved her for full disability benefits on the first application. But that meant nothing to her insurer. It took me eight months to negotiate a deal with them. Meanwhile, friends gave her money to live on. My friend had to sign a waiver preventing her and me from talking about the cases," says West.

Why is it agents and advisors cite such different experiences? That's hard to say, although Natovitz offers an opinion: "I think that advisors may not have the full story. It's not unusual for a claim to be denied initially because the client has not provided the insurance company with all the information requested. The company denies the claim, closes the file and reopens it once the client has provided what's required," Natovitz says.

So perhaps advisors don't have as much claim information as agents who, in turn, probably have less insight into the process than Fred Fox, C.R.C., C.D.M.S., C.V.E. (www.ltddisabilityexpert.com) of Austin, Texas. Those initials stand for Certified Rehabilitation Counselor, Certified Disability Management Specialist, and Certified Vocational Evaluator, and they add to Fox's already-impressive record of work experience. He's spent the last 20 years as a consultant representing all parties involved in the claim process- claimants, plaintiff's lawyers and DI companies-and is presently a consultant on a case that has gone from UNUM claims interaction to active lawsuit. He describes his service as "assessing the abilities and disabilities of claimants who have had their claims denied or payments terminated."

Himself a policyholder with UNUM, Fox says his own evaluations of large DI carrier claim processes in the 1980s convinced him they didn't pay a lot of attention to the claim details, most didn't have required rehabilitation clauses, and they didn't discriminate among claims; for the most part, they just paid them. However, he says, that changed several years ago. "In early 2001, I was called in on a number of cases involving UNUM, Provident, Paul Revere and other carriers, and I was starting to see what appeared to be a wholesale delay or denial orientation."

After a lot of contact with the UNUM adjuster system, Fox says, by the end of 2001, "it became clear they were no longer the same company. I was concerned that most of the people I dealt with on high-dollar claim evaluations had zero training in vocational evaluations or rehabilitation, and didn't have any particular educational credentials. Most also had very little experience with assessment of disability-related medical conditions prior to their starting work as claims adjusters. They had internal policy training, but when I would talk to them about medical documentation as it relates to occupational issues, I was nearly always instructed to state my concerns in writing because they needed to review them with others in-house."

Fox concludes that the big DI carriers now place obstacles in the way of the payment process in order to hold onto money longer. "It appears to me there's now an institutionalized delay in paying LTD claims in that the claims department isn't provided with sufficient medical records to enable them to begin payment when the elimination period is up. So, whereas we were seeing 30- to 90-day delays in the 1980s, payments now take much longer to begin. The companies make retroactive payments, of course, but there's no requirement that they pay a penalty or interest."

Another problem for the claimant, asserts Fox, is the frequent evaluations now required by DI companies. "What they're doing now is requiring LTD recipients to submit monthly certification of disability. The claimants' physicians have usually done a lot of diagnostic work, they feel badly their patients seeking claims haven't recovered, so they comply with these evaluation requests-at first. After six months or so, the physicians start to get annoyed at being asked for the same stuff every month, and the insurers often won't pay that month's benefit if the physician's form isn't completely filled out. The patients don't want to upset their doctors and risk being terminated by them, so they don't press them for this information," Fox adds. On top of all that, he says, the patients need treatment and aren't getting the benefits they need to pay for it.

Where you stand depends partly on where you sit. Not surprisingly, UNUM takes issue with its detractors' characterizations. Ralph Mohney, senior vice president of UnumProvident's Return to Work Services-Development department, says, "UnumProvident's claim process includes numerous safeguards to ensure thorough, fair and objective evaluation of all claims. It begins with extensive training on our process, including our commitment to pay all valid claims. Extensive clinical resources are available to assist in the evaluation of medical information and in developing return-to-work plans. Any determination that a claim is not payable requires review and second-level sign-off by a senior technical expert. We employ approximately 100 physicians and 350 nurse case managers and vocational rehabilitation specialists who apply focused expertise to specific types of claims."

As for delays, Mohney says, "There is absolutely no practice of delaying payments to our claimants. We have defined service standards that we share with our customers at the time they file a claim, specifically outlining our responsibility to provide them with timely and fair evaluation."

In defense of allegations that claims processors are ill-prepared, Mohney describes a process by which new hires destined to administer individual disability claims go through a ten-week training program, followed by their handling of a reduced caseload under mentor supervision. After eight weeks on the job, they are brought back together for two weeks of "refresher" training and are given the opportunity to ask questions based upon their actual claim-handling experiences. Following these three stages, they gradually increase their caseload to a full level.

To illustrate how overblown his critics' statements are, Mohney offers these statistics: 90% of the 421,000 new disability claims filed with UNUM in 2002 were paid; Only 3% of claimants denied benefits in 2002 appealed; Less than half of 1% of all new disability claimants chose to pursue litigation; and Court judgments against UNUM represented one one-hundredth of 1% of new claims.

So what do advisors do now? How do you reconcile this contradictory information, and is it necessary to take additional steps to warn your clients about problems they're likely to have if they ever make a claim against the DI company you're recommending? Mohney agrees that financial advisors must take precautions: "Financial planners who are counseling clients on an income protection purchase should look beyond the policy options to make sure the insurer is responsive at claim time," says Mohney.

But others would go farther. "Buying DI is like buying an airline ticket and then paying an extra 5% for flight insurance," Fox grouses. In other words, regardless of the seemingly self-canceling viewpoints on the industry's present-day claims process, make your clients aware that some folks, just like them, are paying a premium to hire professional help so they can get what's coming to them after the onset of a disability.

David J. Drucker, MBA, CFP ([email protected]), a fee-only financial advisor since 1981, is co-author of the book Virtual Office Tools for the High-Margin Practice (Bloomberg Press, 2002) and the Virtual Office News newsletter, both available at www.virtualofficetools.net.