Tag Archives: ltd

COVID-19 May Mean Big Changes for LTD

Twenty-six million Americans are out of work, among them a large share of people who can no longer afford to put off applying for disability insurance. Where previously they may have been able to continue working for an accommodating employer or solely rely on their spouse’s income, today, there’s a good chance that’s not so. 

We have seen this happen with disability insurance in just about every recession in our nation’s history, so this shouldn’t come as a complete surprise. However, this downturn isn’t like most. Caused by a global health crisis, the current decline may bring additional changes to the long-term disability (LTD) industry that require strategic alternatives during an evolving economic environment. 

Consider all the cancer screenings that are on hold for two to three months or more. With progressive diseases or conditions like cancer, early detection is key. So, with these nonessential but still incredibly important appointments getting delayed, this means that, when forms of cancer are eventually detected, many could be in advanced stages with limited treatment options. 

This pandemic might also influence people’s thinking about both short-term and long-term disability insurance, including the possibility of more unexpected diseases like COVID-19. Reporting about the current pandemic already refer to prior outbreaks, such as SARS, MERS and the swine flu. These illnesses have been flagged by some researchers as more likely over the coming decades due to climate and environmental changes. As a result, employers and their employees might see even more value in disability protection.

See also: The Messaging Battle on COVID-19: Are Insurers Losing?  

Not only are LTD carriers in a position to see claims rise, they’re also in a position to see an uptick in business inquiries. This can be a positive, but things could quickly get out of control without the right insights and support. According to recent analysis by the Integrated Benefits Institute, costs for sick leave related to COVID-19 may be in the range of $6.1 billion to $23 billion in 2020, and short-term disability claims could go into the millions of workers affected.

To ensure success, LTD carriers are going to have to pay close attention to how much money is being paid in disability claims versus the rate of purchase by employers and their workers; the latter ideally outweighing the former. Third-party service providers may be able to help identify new developments. It can be hard to see emerging trends when you’re in the middle of them. Independent resources may have access and information to spot potentially significant marketplace trends— like COVID-19 survivors reporting long-term health issues—in their early days. 

Early analysis by medical professionals is finding multiple potential long-term health effects from the coronavirus, including conditions that fall under categories of long-term disability such as stroke among individuals under 50, long-lasting lung damage and damage to the heart, kidneys and brain. Research and medical studies are continuously advancing as the virus spreads. 

These developments signal the value and importance of accessing existing benefits such as Social Security Disability Insurance (SSDI), which covers more than 156 million U.S. workers. As more people experience COVID-19, LTD carriers can benefit by partnering with third-party providers capable of monitoring and assessing emerging health impacts. An added benefit is that these providers can help LTD carriers reduce spending by coordinating and assisting former workers to access the SSDI benefits they earned while working.

The LTD industry has long looked to third-party organizations to help them determine if a beneficiary is eligible for SSDI benefits. Steps include walking individuals through the application process and doing everything possible to make sure that person is approved for disability benefits as soon as possible. 

See also: 3 Tips for Improving Customer Loyalty  

This is important because almost two-thirds of SSDI applicants are initially denied during the application process, which lasts three to five months. If a claimant files an appeal, the reconsideration level of review by the Social Security Administration requires an additional four to six months, and only one in 10 claimants will be approved. With a second denial, claimants must file another appeal to the hearing level. This appeal may require another 12 to 24 months—up to two whole years—before an applicant receives a hearing with an administrative law judge, and less than half of these individuals are approved nationwide. 

During this time, LTD carriers can be paying the individual’s disability benefits and providing an important financial backstop for American workers. That reality is significant when coupled with the current environment as the LTD industry enters unprecedented times, and raises the opportunity for LTD carriers to explore and expand their alternatives with third-party service providers. If we’ve learned anything from this crisis, it’s that we’re stronger when we work together.

3 Problems Solved by Going Digital

Much has been written about the promise of digital technology to change insurance. But what does this mean in practical terms? Can digital technology reshape traditional patterns of engagement between insurers and their customers that have existed for decades (or centuries)? Can technology create a value proposition that avoids a zero sum game and benefits both insureds and insurers simultaneously?

This post identifies three major opportunity areas for insurance and describes what one insurer, Tokio Marine & Nichido Fire Insurance, has delivered to make the transition to a digital insurance platform.

Consumer expectations are increasingly being conditioned by the best practices found on sites such as Amazon, PayPal and eBay. Compared with these experiences, the traditional insurance process presents insurers with a number of challenges. Three problematic areas are:

  • Buying is periodic: In the majority of sales, insurance is purchased infrequently. In some lines of business, such as life insurance, it may only be bought once (and used only once!). In personal lines, annual or semiannual renewals are automated, and a customer may never speak with an agent or a representative of an insurer. This lack of contact limits the opportunity for a distributor or an insurance company to establish a significant relationship with a customer and personalize the buying experience.
  • Risk is poorly managed: Sales may be periodic, but risks are continuous. Business conditions and lifestyles change over time, and specific products, limits and coverages should be introduced at strategic times to respond appropriately. Changes in conditions – when a contractor offers a new type of construction, or a commuter in a dense metro area begins working from home and parks his automobile – need to be identified immediately and responded to appropriately. In an ideal insurance scenario, risks are managed on a continuous basis. However, in the current model, active risk management is a high-touch, high-cost service. Low premiums on products such as small business insurance provide little incentive for agents to service the risk management needs of customers appropriately. As a result, too often, insureds unintentionally self-insure. Many a claim submission includes the comment, “I have insurance; I thought I [or my business] was covered!”
  • Payment, not avoidance, is the focus: The best loss is the one that is avoided altogether. However, the core of most traditional insurance products is to compensate an insured financially for a loss caused by a covered peril. This results in an emphasis on paying claims, not avoiding losses. While insurers are very familiar with the typical causes of loss, their customers generally are not aware of how their day-to-day behavior affects their loss exposure. Consumers and business owners do not typically evaluate their behaviors, lifestyles, operations or choices in light of loss potential and, thus, participate in behaviors that expose them to loss. For example, individuals choose to post vacation pictures on public forums such as Facebook, which increases their exposure to theft at their vacant home.

Tokio Marine & Nichido Fire Insurance (TMNF) began addressing the periodic sales challenge in 2010 by moving to a more continuous delivery platform. Offering personal lines insurance in the Japanese market, the company found that its traditional products did not allow it to sell to clients on a frequent basis. To change this dynamic, the company combined new technology with updated insurance products to fundamentally change the traditional process of customer engagement. The company developed a series of one-time, short-term insurance solutions that addressed targeted needs such as travel, skiing and one-day automobile insurance. The company partnered with a leading telecommunication provider, NTTdocomo, to sell these on mobile telephones. The buying experience requires very little customer input of information (because the phone company has most of the required demographic information), and payment for the policy is part on the next phone bill.  Over time, the product set has expanded into health coverages and now takes advantage of continuous health tracking technology. These make wellness recommendations to users on a daily basis and has helped TMNF make the transition from a periodic insurance provider to an active participant in its customers’ lives.

Leading insurers are beginning to discover how to innovate with technology and product to change traditional trade-offs and deliver higher-value solutions to their customers. In subsequent posts, some solutions to the challenges of suboptimal risk management and loss avoidance will be detailed.

Life Waiver of Premium Part 2: Optimizing Claim Management Operations

This is Part 2 of a two-part series on waiver of premium. Part 1 can be found here.

Recognizing the need to improve claim management processes in waiver of premium claims, life insurers are turning to technology to replace inefficient operations associated with manual claim processing.

“Insurers today have an opportunity to bring automation into the life waiver of premium adjudication process to improve existing business models,” says Eric Lester, vice president of administrative services at Legal & General America. “It’s about operational efficiency, providing a good consumer experience, and integrating forward-looking solutions that fit the profile [that] business models in the industry should emulate. This is why we’re thinking forward—strategizing as how to integrate these efficiencies into everyday processes.”

Insurers can streamline the claim adjudication process by standardizing procedures to substantially reduce manual claim handling and support lowered risk management outcomes.  This next level of technology not only yields greater improvements in life waiver claim management but also enables insurers to focus on the effectiveness of their claim decisions.

Scope of the Problem

For benefit specialists to effectively manage claims and provide highly personalized results requires access to relevant medical data from multiple sources.  Life waiver claim management requires collecting, collating, and communicating the claimant’s medical notes and pre-disability occupation data to evaluate their current capabilities, restrictions and limitations. The information derived during the initial assessment stage builds a critical foundation for ensuring consistency not only in the initial claim interpretation but in the recertification process, as well.

The handling of restrictions  and limitation (R&L) data, occupational identification information, and policy definitions  continue to follow more traditional manual processing procedures, resulting in claims frequently adjudicated without the required data, or against underwritten policy definitions. Here is what’s happening with manual processing:

manual processing

Insurers rely heavily on the Attending Physician Statement (APS) forms to collect medical status data. However, considering the high volume of claims per specialist and the time involved to manually process them, information contained in the APS isn’t always fully translated. Because of this, forms are often lacking the complete information required to fully understand the claim, based on a fair and accurate assessment of the claimant’s physical capabilities, restrictions and limitations. Moreover, this manual process makes it hard to ensure consistency throughout the duration of the claim.

For example, if the physician states that the claimant is unable to work and fails to provide a written medical basis in the APS forms regarding the decision, benefit specialists are unable to accurately assess and match the claim to the appropriate contractual definition of disability as defined in the claimant’s policy. This process makes it difficult to determine if the liability should be accepted or denied.

Managing the risk throughout the duration of the claim can influence claim outcomes by providing the opportunity for better claim management for both the insurer and the claimant.

The Long-Term Disability & Life Waiver Chokehold

It is not uncommon for consumers to have both their long-term disability (LTD) and life insurance with the same insurance carrier. So, when a person goes on disability, there are essentially two claims open and running simultaneously. The problem is the life waiver claims aren’t being treated as disability claims—which is, in reality, what they are.

What typically happens is the LTD claim becomes the driving force while the life waiver claim takes a backseat, often translating into processing delays. Even though these plans usually reflect two very distinct definitions (LTD claims begin as a two-year “own occupation” plan, while life waiver is usually “any occupation” provision from day one), the life waiver claim sits—waiting to see what the LTD claim is going to do first.  The life waiver claim essentially becomes more of a contractual definition of secondary importance, and consequently is managed as such.

Insurance carriers must be diligent in applying adjudication decisions consistent with what is underwritten in the life waiver provisions of an insured’s policy, and not based on what’s happening with the LTD claim. This has become increasingly problematic as caseloads continue to grow and life waiver claims follow the LTD claim by default, increasing the insurer’s reserve liabilities (i.e., disability life reserves, morality life reserves and premium reimbursement liabilities), and risk exposure.

Unfortunately, once a disability has been accepted on a life waiver claim, there tends to be minimal risk management. Improved risk management in life waiver claims should include best practices that focus on understanding the severity, restrictions and limitations of the claimant, then matching claimant capabilities to the occupational policy terms.

Better Claim Monitoring, Better Results

What’s missing within life waiver processes is the ability to manage the claim block holistically with information derived from all necessary sources, and integrating it into a unified data platform. By doing this, insurers can quickly identify claimants that have occupational opportunities based on their specific physical capabilities, restrictions and limitations, education, experience, and training. But it doesn’t stop there.

Once an occupational opportunity has been determined, insurers can compare these findings to occupations identified by the department of labor and match the capabilities of the claimant to a specific occupation. In addition, medical details surrounding the claim should be updated continually and combined with historical data, as physical capabilities can change over the duration of the claim. This type of automated vocational support allows adjusters to fully evaluate the claimant’s condition for available occupation opportunities.

Considering the thousands of claims that are processed manually by examiners, it can be difficult to ensure that new claims and the recertification of claims are being completed on time, consistently, and in line with risk management best practices. This becomes an almost unmanageable task for examiners as they struggle to maintain the continuity required to reopen, examine, and research individual claims from day one. It is a continual problem because a claim that is approved today may look completely different a year from now.

“With technology, there is a great opportunity for insurers to make operational changes that will systematically improve their current adjudication processes and minimize the insurer’s reserve liabilities,” explains Thomas Capato, CEO of FastTrack RTW Services & Solutions, whose Life Waiver Tool is the first commercially available technology to automate the waiver of premium process. “This next-generation best practice will not only help improve internal productivity for life insurers but allow waiver reserves to be managed properly and improve future actuarial assumptions.”

An automated claim process allows for continual claim management and tracking that’s set to the claimant’s policy terms, ensuring that all follow-ups are done in a timely and consistent manner — without the need for manual intervention.


Every claim has unique situations, and insurers need to apply the right risk management principles to that particular claim. This can mean the addition of a single automated application, or perhaps a combination of many, internalizing processes to determine the best solution for enhancing risk management outcomes.

“Technology enhances the ability to fully capture specific information surrounding the nature of a claimant’s disability for better risk management within the life waiver block, providing insurers with an accurate profile of the person, the job, and occupational capabilities,” says Lester, at Legal & General America.

It’s time for life waiver processes to utilize technology to manage claims in a more efficient, effective, and standardized manner. By replacing manual claim tasks with the rigor of automated monitoring, insurers have the opportunity to optimize existing processes and improve overall operational efficiencies within their life waiver claim block. Moreover, it is this technology that can make consistent, supportable and repeatable real-time decisions, bringing value to both the insurer and the claimant.