Accelerated Death Benefits:
Blessing Or Curse?
On a cold and windy day in early December, Elaine (not her real name) lay huddled in her tiny basement apartment in Chicago trying to keep warm. A 48-year-old Filipina immigrant, Elaine had been diagnosed in August with metastatic liver cancer, a disease with a survival rate of only 9% after a year, 3% after 2 years and 0% after 5 years. With little left in life to look forward to, Elaine on this day was anxiously awaiting a call from her cousin, an agent with a highly respected career insurance company, saying her claim under her “Living Benefits Rider” had been approved. She was hoping to use the money to fulfill her only 2 remaining dreams: a trip to Rome to visit the Vatican, and a last trip home to the Philippines while she was still well enough to travel.
The call from the agent finally came, with the news that the claim was being denied. The attending oncologist, it seems, refused to “certify” that the client had less than 12 months to live. She instead wrote in her letter that this patient “may” live as long as 22 months with some experimental therapies being tried.
This certification is required by the carrier as part of the “evidence” of terminal illness needed for a claim, according to the contractual language in the rider. An appeal to the president of the company to waive this requirement and pay the claim based on the dismal statistics of the diagnosis in the APS was to no avail. On Christmas Eve morning, final word came down from the home office. No apology, no regrets. “Claim denied, you may re-submit in 8 months.”
Until this happened, I must admit I had paid little attention to the accelerated death benefit riders that most carriers now offer at no additional cost. I became curious if all carriers had the same language, so I studied the language used by about 10 reputable carriers.
What I found amazed me. Most, but not all, include the requirement of certification by a licensed physician. However, the definitions of terminal illness vary wildly, from 6 months to 2 years to simply “terminal.” First lesson: Agents should examine their carriers language carefully when discussing this rider with clients and prospects.
However, it is this “certification” requirement I find most troublesome.
The fundamental problem here is that physicians are physicians. They are not underwriters or actuaries. When a client is underwritten for life insurance, do carriers require as part of the underwriting process that the doctor make a statement as to his or her opinion of the clients life expectancy? Everyone in our business would surely view this as absurd.
It is the underwriters job, not the doctors, to evaluate the medical evidence in an APS, determine the clients life expectancy and assign an appropriate rating. Interestingly, this particular carriers illustration software is the only one I know where the clients life expectancy actually is calculated and displayed when the clients age and rating are entered. Clearly, then, this carrier recognizes this responsibility as theirs and not the doctors when it comes to life underwriting.