NAIC Looks At Disability Insurance Best Practices

BY JIM CONNOLLY
National Underwriter News
December 10, 2008


Grapevine, Texas -- Advocates of a proposed disability claims best practices list are clashing with insurers over the need for the list.

Participants here for the winter meeting of the National Association of Insurance Commissioners, Kansas City, Mo., talked about the topic at a public hearing organized by the NAIC's Consumer Protections & Innovations Working Group.

A total of 535,000 Americans received disability claims payments in 2007, according to Marty Mitchell, director of product policy at America's Health Insurance Plans, Washington.

About 80% of the claimants received payments in 30 days or less, Mitchell noted.

Mitchell asked why a disability claims best practices list is needed.

Steve Clayburn, a senior director and actuary with the American Council of Life Insurers, Washington, said insurers should handle claims "properly and promptly," but he observed that $7.7 billion in claims are paid annually.

With such a large volume, there will be some claims that do not receive proper treatment, Clayburn said.

But rather than creating an "overly proscriptive list" of best practices, regulators could encourage use of existing remedies, such as the Unfair Claims Settlement Practices Act, the Employee Retirement Income Security Act and market conduct exams, Clayburn said.

A best practices list would create de facto regulation without the de facto regulation going through the NAIC model law process, and it would act as "a template for trial lawyers," Clayburn warned.

Mark DeBofsky, a lawyer with Daley, DeBofsky & Bryant L.L.P., Chicago, said the NAIC is "on the right track" with efforts to create claims guidelines.

"There are a substantial number of claimants who are not having positive experiences," DeBofsky said.

However, DeBofsky said, in his experience as an attorney, he has found that regulatory action does make a difference.

DeBofsky said he finds some carriers, such as Principal Financial Group Inc., Des Moines, Iowa, and Northwestern Mutual Life Insurance Company, Milwaukee, do pay claims in a fair way.

One challenge is that certain diseases, such as multiple sclerosis, are difficult to identify, because they can have many different symptoms, ranging from fatigue to balance problems and depression, according to Dorothy Northrop, a vice president at the National Multiple Sclerosis Society, New York.

Consequently, it is imperative that trained claims personnel review cases and seriously consider doctors' diagnoses, Northrop said.

Maine Insurance Director Mila Kofman, chair of the working group, said a best practices list might act as a shield against lawsuits if companies adopt best practices.

Kofman said she would give insurers about a year to adopt the best practices.

If the carriers do not, regulators could improve claims practices by adopting a law that would have teeth, Kofman said.

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