I think disability insurers should swallow hard and get whatever antitrust approvals or other approvals they need to have, some tough, independent organization to post easy-to-understand, marketwide claim resolution statistics.
Ideally, the statistics would give median claim approval rates and claim resolution times, along with bottom-decile and top-decile statistics.
Maybe the independent body could try to adjust for malingerer-on-sofa problems by, for example, posting separate statistics for completely subjective conditions, partly subjective conditions and not-at-all subjective conditions.
Give would-be buyers some idea of how likely they are to get paid, and in what kind of timeframe, if they have conditions such as strokes, heart attacks or paralysis.
In my personal life, I’ve never met someone who suffered a disability and had disability insurance.
I’ve met three people who did have disability insurance when they became disabled. Two of the three looked to me as if they were about as employable as anyone else. One used the income he got from his disability benefits to set up a busy political advocacy organization, and another used hers to set up a food truck-based business.
So, my own personal experience is that fraud against disability insurers is extremely common. Even when claimants really have health problems, the main challenge many of those claimants face is employers’ reluctance to employ people with health problems, not any serious difficulty with working.
But I also run into many people who like they idea of disability insurance but are afraid of buying it because they are skeptical about the possibility that an insurance company would really pay a claim.
One self-employed relative told me, for example: “I would like to have disability insurance, but, if I needed benefits, how would I collect?”
The topic came up a couple of weeks ago when I wrote a blog entry about figuring out how to get consumers to “come up with the idea of insuring their income all on their own,” rather than flat out telling them about the concept.
A consumer reader emailed me to complain about the fact that I’d written anything positive about disability insurance. She said workers in group disability plans really can’t collect benefits at all.
Of course, even in the face of the Employee Retirement Income Security Act limits on suits against benefits plans, and even in the face of state regulations that allow many group disability plans to include broad discretionary clauses, group disability plans pay out a fortune in benefits to claimants.
But I, as an ordinary individual without any special access to claim access databases, have no good way to tell how smoothly or how poorly either the individual disability or group disability claim process really works.
When, occasionally, I try to write about that topic, I end up calling around to lawyers and brokers to ask them what they think. Usually they hem and they haw and give me an answer that boils down to, “I dunno.”
Maybe carriers are reluctant to publish those statistics because, given how common malingering is, or they think it is, the statistics are not that great.
But maybe honest, grim statistics would give everyone an incentive to get together to figure out how to make the private disability claim triggers and claim determination process work better.
Consumers who are suspicious of insurance companies might feel more confident if they see figures that are too mediocre to make any marketing department happy than if they see figures that seem to be too good to be true. Those consumers might be surprised to see that the insurers do actually pay a lot of disability claims, even if not all of them.
Another way to make consumers happier might be to compare the private statistics with the Social Security Disability Insurance program determination statistics, to show how for-profit carriers stack up against a disability program that has no incentive to produce a profit.