Doctors and dentists had a tough time of it for a while when looking for disability insurance. The advent of managed care was followed by a groundswell of medical personnel leaving the field through disability, to such an extent that insurance companies instituted severe policy restrictions on coverage for doctors and dentists. The restrictions were so stringent that, if they could find policies at all, premiums were so high, underwriting requirements so strict, or conditions under which benefits could be collected so limited that many despaired of finding decent coverage.
Things began to loosen up around 2005, when companies’ underwriting began to relax. When disability insurance sales fell between 30% and 35% in the general market during the recession, insurers began to look at ways to boost sales to the portion of the population that had always reliably bought coverage: physicians and dentists. (See “Coverage Options Expand,” Investment Advisor, October 2009)
However, even though coverage could once again be had, that didn’t mean that insureds were completely happy with their policies. One bugaboo in medical/dental coverage has been the definition of total disability.
There are three different classifications of disability: the sought-after “own occupation,” which says that an insured will be considered disabled and will be paid benefits if unable to perform the material and substantial duties of her occupation; the “modified own occupation,” which says the insured will be considered disabled and paid benefits if unable to perform the material and substantial duties of her occupation and is not working; and “any occupation,” which says the insured will be considered disabled and paid benefits if unable to work at any occupation for which she is reasonably suited by education, training and experience.
The first definition—the “gold standard” that doctors and dentists look for when buying coverage—was very difficult to find or very expensive. The second was the most common. That last, however, was a very high bar to jump, since it meant any job at all was considered a viable substitute to a medical or dental practice.
Under the first two, physicians and dentists who also taught, or who did other work such as consulting or administration as part of their practices, might not have been considered disabled if they were still able to perform those other tasks, even though they might not bring in anywhere near the income that the actual practice of medicine or dentistry would—and might not make up very much of their practices, either.
Enter Northwestern Mutual and its definition of “own occupation.” According to Ken Latus, director of disability insurance product development at Northwestern Mutual, “In 2008 we conducted a bunch of market research around the medical/dental professions and the misconceptions about coverage available at the time.” The company wanted to “get educated … and develop a new product that would fill those gaps [left by misconceptions regarding coverage].” And they found plenty of misconceptions by insureds about the kinds of coverage they thought they had.