Geller Insurance

Intermediate Disability Insurance
By: Lawrence Geller

CFP*

Lawrence Geller is one of the most prolific writers of individual and group disability in Canada. Working with professional partnerships, upper income individuals and other life brokers he is constantly one of the leading producers of disability coverages in Canada. This is not a presentation on how to sell disability. This presentation will teach the broker who currently writes disability insurance business what he needs to know to write high quality business for discerning clients. The focus will be on structuring applications and underwriting that are so thorough that clients will have the highest possible expectation of good treatment in event of a claim.

Independent Life Brokers Summit October 4, 1999

Part 1 - Determining the need for disability coverage, evaluating alternative coverages, making written recommendations.

Part 2 - Taking the application, reporting to the insurer and client, annual reporting to the client, regarding options and coverage, providing timely advice and counsel.

Part 1 - Writing the bullet-proof application: providing documentation and substantiation of information provided and creating a reasonable expectation of the performance of the product purchased.

Part 2 - How to assist, not hamper, a disability claim.

(13.) Part 1 - Determining the need for disability coverage, evaluating alternative coverages, making written recommendations.

It is often said that most of us will either die too soon, or live too long. These are the problems that are at the foundation of our work.

As Estate Planners, whether we are Insurance Agents, Financial Planners, Investment Advisors, or in some other role, our job is to try to help our clients to:

- accumulate wealth in an efficient and tax effective manner;
- provide for themselves during their lifetimes in a forecastable fashion; and
- leave what is left in an orderly manner to chosen beneficiaries;

and each of these three parts is of equal importance to our clients.

Recently, I was asked to read over a basic estate planning text to see if anything had been missed.

I was shocked to find that although great and lengthy attention was paid to the accumulation and preservation of wealth and assets while an individual is working, as well as to the preservation of assets during retirement and at death, very little attention was paid to the question of the inability to continue to work through a projected "active working life".

I have always understood that there are five different things that can happen to an individual's ability to work. They are:

- death;
- disability;
- voluntary early resignation;
- forced early resignation; and
- retirement.

While we can do nothing about the occurrence of any of these events, it is normal that we be asked by clients to help them to prepare to face any one or more that may occur.

In other words, for the most part we are not helping our clients in every way to provide for themselves during their lifetime in a forecastable fashion.

I readily admit that few of us are happy about considering the possibility that we can be forced to stop working when we still want, and need, to earn an income and when our retirement accumulation is not yet complete, but it does happen.

Sometimes people are subject to sanctions and suspended from work.

Sometimes work disappears.

Sometimes people get ill.

To a much greater extent than most, my practice deals with the potential for disability.

In consequence I spend a lot of time asking the questions:

What happens if ill health, or an accident, shortens the working part of a client's lifetime by even a few years?

Doesn't that affect all of that individual's plans?

What would it take to keep them whole financially if their income was reduced or if it stopped, either for a short time, or permanently?

What choices do they have?

They could:

- live on less;
- use some of their capital at the expense of their savings & retirement plans;
- get an income from their professional practice at the expense of:
- capital value,
- retained earnings or earned surplus,
- ongoing profits;
- other family members;
- insure their incomes against the risk of disability.

We talk about Inter-vivos and Testamentary Estates, and by and large we do an excellent job helping our clients with the latter, but what of their inter-vivos needs?

Do we spend as much time advising our clients of the ways that they can protect themselves against the loss of their income as we do about the ways that they can protect themselves against high taxes?

Do we talk about what they will live on if their income stops due to sickness as often as we talk about retirement?

Do we talk about the possibility of disability as we do about the eventuality of death?

To the best of my knowledge there is now no coverage available against job loss and the only way to prepare a client for this occurrence is to encourage them to save enough to create a very substantial cash reserve.

But even the a great cash reserve can't fully insulate someone who has no income against a catastrophic erosion in lifestyle due to the loss of their earnings. And as we quickly discovered in the 90's spate of layoffs and restructuring, even a moderate loss of earning power can radically affect an individual's lifestyle and retirement plans.

Just imagine what effect a disability can have, even if it is only a partial disability that reduces earning power.

In planning with our clients, and in the design and drafting of their plans, we often skim over their need for income prior to their projected retirement date, assuming that they will be able to work as hard as they want, for as long as they want, and need, to earn an income?

We can't insure against loss of employment, but we can insure against disability. This, however may require a little care if the insurance is to be properly constituted.

Disability insurance provides a financial lifeline at a time when our clients are at their most vulnerable. When they can't work, are worried about their health, worried about their future, and worried about their family disability income protection benefits allow them to pay their bills, maintain their lifestyle and their dignity.

Yet many of us hesitate to discuss this coverage with our clients. We think that they will be covered at work. We think that it is too complicated, or too difficult to underwrite, or too expensive.

I confess that, for the last 20 years or so I have made my living from disability insurance. I sell life and group as well, and recently CI, but it all comes in because of the work that I do in DI. To me it is the obvious prospecting tool.

Disability is a greedy purchase. It is paid while we are alive. It pays when we are still around to face the music. It pays when we still get to listen to our family tell us what they want. It pays when we can't earn as much as we did before because we are ill, or injured. It allows us to maintain our dignity at what is often an otherwise most undignified time.

I have an unusual perspective on the right amount of coverage. I deal with claimants a lot. On any day I may speak with 2 or 3 and my assistant may speak with 2 or 3 others. I know what they go through. I know that the amount they need is, as much as they can get. I listen to them telling me how their expenses have increased. I listen to them when they talk about the real rate of inflation on kid's shoes and tuition and food.

The right amount of disability insurance is the most that will be paid. If a policy has an All Source Limit of 85% of net pre-disability earnings then that is the amount that a client should have.

You see, the limits are determined by applying the tax tables to a single breadwinner with 2 dependants and no other deductions. I don't know anyone with no other deductions, but the underwriters must have found someone.

My point is that no-one pays that much tax, and has that little after tax income, let alone 85% of it.

Just think. Could you pay your bills if your income went down by 15%?

If you are insured to the maximum then that is the best that will happen if you have a claim.

If you have less ... .

Big Bob Gould of what was then Revere used to talk about reverse discrimination. That is where a plan design gives 85% of net to someone at $30,000 a year and 60% to someone at $60,000 a year and 40% to the boss who earns $150,000 a year. It never made sense to him that a boss was less valuable on a % basis than an employee. After all, the boss keeps the business together. Without the boss nobody else works.

Many of our clients not only own and run their businesses, but they are also their most important employees. In many cases all or most of their staff are employed to support the work generated by the owner. In these cases great care must be taken to work with the owner to establish what would happen, and what they would like to happen, in the case of their disability.

Think of yourself as an example. You find the prospects. You make the appointments (although in this you may have help). You meet with the clients. You work with the client to establish their needs. You determine which product or combination of products you will recommend. You take the application(s).

Then you hand the application(s) off to people who work with you for processing. When the policy is issued you deliver it to the client.

People who work with you may answer some of your clients' questions when they call, but most of the time it is you that they will want to speak with when they have a problem. Then, year after year, you contact the client to review their needs and determine whether the coverage which you sold remains both appropriate and sufficient to meet their needs.

What would happen if you couldn't do some of the things that I have just listed? Wouldn't that depend on which things you could or couldn't do? Wouldn't it also depend on the length of time that you were unable to do them? It might also depend on the experience of the people who work with you.

But, in all likelihood, your practice would begin to suffer very quickly if you couldn't meet with clients, or talk on the 'phone, or get around. What would happen then?

If your income began to suffer could you still afford to pay the rent for your office, and your leases, and your employee's salaries, and your other expenses? What would your clients think if your 'phones weren't being answered, or worse yet, if they were disconnected?

Would the clients still think of you as their agent if they tried to contact you and couldn't?

How long would it be before your practice began to lose value?

Now apply the same scenario to each of the clients who you deal with who is key to their business. Would the same problems occur? How long would it be before the result could not be reversed?

Is that what they would want? Of course not. They would want their business to survive so that they would have the choice of returning to it or selling it if they couldn't return.

Reporting to our clients is the way that we confirm the needs that they have discussed with us, go through their alternatives, present them with recommendations, answer their questions, apply for their insurance, deliver their policies, tell them what their choices are each year, and make new recommendations.

Our job, in the final analysis, requires that we make recommendations to our clients regarding their insurance needs. We are required to evaluate their need for insurance, quantify the need, and recommend those policies that we feel, in our informed opinion, suit the circumstances best.

When I first started in the business we sat down with a client, a rate book and a piece of paper on the table in front of us. We talked, we quoted and we took the application. While this may still happen, it seems to me to be unwise to either buy or sell insurance without tracks in the sand to show that the client was fully informed before they bought.

The best tracks that I know how to lay down are written. I find that starting with an analysis of the client's situation gets us both comfortable. It lets us confirm our understanding of what we have discussed.

Following the analysis is the recommendation phase. Again only a written report to the client shows that we have been thorough and that we have acted in the client's best interests. It also allows the client to review the various options that we have recommended as being appropriate so that they can decide, for themselves, which is most appropriate to their circumstances and needs.

Disability insurance can seem complicated. Even those of my clients who are lawyers have difficulty understanding the contracts on their first reading of them. Few others would succeed. Our job is to help our clients to make informed decisions. In order to do so we must be informed about the choices ourselves.

Not too long ago, in the days when there were more than twice as many insurers selling disability insurance as today, most of the policies were very similar. In most cases an agent would almost have had to know in advance what type of claim to anticipate before they could be distinguished between them.

Now, with fewer players, the insurers are starting to design their policies for specific market segments. In order to make a recommendation we have to understand the differences between these policy forms and determine which are worded to most closely match our clients' expectations.

Because of this, making recommendations begins with the analysis stage. We have to determine what each client wants in the event of a disability. I generally find that this means that I have to explain the types of insurance policies to them. My explanation is:

For your heirs to get your life insurance death benefits the insurer has to be satisfied that:

- an insured individual has died;
- the insurance coverage was in force at the time of death;
- it had not been fraudulently applied for; and
- the cause of death was not ineligible (nuclear holocaust, etc.),

To get paid disability benefits, you also have to:

- satisfy the definition of eligible disability;
- complete of a benefit waiting period; and
- an eligible disability has to continue for a specified period.

Of all of the things for which we buy personal insurance coverage, disability is the most likely to occur. Disabilities are, at best, traumatic. Physical stress can be trying enough without concerns about paying financial obligations. Disability insurance is available in many forms, and due to the nature of the risk, which may be:

- partial or total,
- continuous or intermittent,
- of short or long duration,
- a single occurrence or recurrent,

policies can appear to be complicated.

Essentially four basic types of disability contracts are available:

1. Group Long Term Disability.

- Neither the premium nor the definitions are guaranteed.
- The insurer can, generally each year on the renewal date:
- change the coverage which you have, and / or
- change the premiums which you pay, or
- cancel the policy.

Definitions in Group Long Term Disability contracts are almost always designed in such a way that the risk to the insurer is reduced by any other insurance which you have, and by any benefits from the government (including CPP disability benefits), from car insurers, or by any income which you can earn.

This is accomplished through the use of the greatly misunderstood "All Source Maximum" which allows the insurer to calculate the maximum benefit payable, after deductions, without any reference to the amount of benefit paid for by the certificate holder.

Group insurers also maintain the right to insist that you participate in a mandatory rehabilitation plan, of their choosing. If you don't participate, the claim is cancelled. If you do participate, the claim is reduced and subsequently terminated. This allows them to reduce their risk of payment.

2. Association Group Disability.

This form of coverage is most similar to Group Long Term disability in that:

Benefits payable under Association Group Disability contracts are generally reduced by any other insurance which you have, and by any benefits from the government (including CPP disability benefits), from car insurers. Far from having "own occupation" definitions, these contracts allow the insurer to mitigate by taking into account any income which you can earn from any occupation.

Most Association Group insurers also give the insurer the right to insist that you participate in a mandatory rehabilitation plan, of their choosing.

3. Guaranteed Non-Cancellable Individual Disability Income Protection.

- Policies are fully guaranteed.
- They can not be cancelled by the insurer.
- The insurer can't change the premium which you pay.
- The insurer can't change the contract's definitions.
- Only you can make changes to the policy.

This is the only form of coverage where some insurers accept the full risk without the right to offset or reduce benefits payable.

But even these policies are not all equal. Some now contain definitions that allow the insurer many of the rights that they have under group contracts. These are often, but not always, called "Loss of Earning" policies. Care should be taken to assure that clients understand the differences between various coverages offered so that they are able to make an informed choice.

4. Guaranteed Renewable Individual Disability Income Protection.

- The insurer guarantees to renew the policy,
- with the existing definitions,
- at whatever premium they feel that they require to meet their obligations provided that they do not actively discriminate.

This type of coverage transfers much of the risk to the insured. The insurer knows that all that they have to do is to charge a higher premium to get you to cancel your policy, and thus to get out of the risk. While most will deny that this would be in their interest, causing insurable policy holders to seek alternate coverage, and leaving them with the bad risks, we have, in past, seen exactly this behaviour with other, non guaranteed coverages.

While my personal preference is for the fully guaranteed products, since they allow the insurer the least latitude and give the greatest degree of certainty to the client, I readily acknowledge that group LTD plans play an essential role in insuring employees.
This, if you wish, is the overview. Some clients may make it clear that they require limited coverage, or coverage for a specific purpose, or for a fixed period of time. Others may express the fear that a loss of income would be a problem, but have no precondition regarding their employment. Yet others may have spent decades going in a straight line and want to assure that they would not be forced to accept less than they have earned.

Each of these scenarios will allow an agent to quickly determine the type of coverage that will meet the client's expectations.

Others may require more information before they can make this choice. For these I find that questions work well.

Would you be willing to accept a job with less of a future if the insurance company topped your income up?

Would you want to be paid if your income was reduced?

Do you want a guaranteed premium or is it OK if the insurer increases the premiums if there are more claims than they expect?

Do you want to be covered for illness and accidents or will accident only coverage meet your needs?

Please don't take me wrong. I know that the way that you ask questions is everything and that I have put a negative slant on many forms of coverage with these questions, but I wanted to illustrate how some policies can, accurately be portrayed.

Most forms of coverage have their place. For someone classified as a B or even an A, a plan that paid for 5 years for sickness and to age 65 for accident might be the best available.

For those who have a medical or mental and nervous history accident only to age 65 might be a liberal offer from an insurer.

My point here is that we have to make full disclosure to our clients and allow them to chose. We would be wrong to presume what a client will be willing to pay for protection.

In order to chose they have to know what the best plan available to them will do, and what it costs, and these have to be compared with other alternatives.

Then we can make our recommendations, in writing.

Our recommendation is the plan that we best feel will meet the client's needs. It may not be the policy that the client ultimately chooses to buy, but they are now in a position to make an informed decision

(14.) Part 2 - Taking the application, reporting to the insurer and client, annual reporting to the client, regarding options and coverage, providing timely advice and counsel.

I was asked to speak today about the Duty of Care in the sale of Disability and Life Insurance. This, of necessity will include our need to get to know a prospective client and their insurance needs as well as the fact finding that we do; the application itself and the underwriting process and then ongoing service to the client. This will not, in this case, include a discussion of assisting with claims settlement.

I recently read a definition of the Standard of Care that said:

"An agent who undertakes to procure insurance for another owes a duty to exercise reasonable skill, care and diligence in effecting insurance. An insurance agent is obligated to exercise the knowledge and skill reasonably to be expected of one engaged in the business of procuring insurance, and ... may be held liable for failure to do so."

The article went on to discuss an American case in which the decision, in part was:

"This is an age of the specialist and as more occupations divide into various specialties and strive towards that status, the law requires an even higher standard of care in the performance of their duties."

and in another case the decision read, in part:

"The respective duties and obligations arising from the relationship of a principal and his agent in the procurement of insurance must be determined in the light of the fact that the agent was an expert dealing in a highly specialized business, with knowledge and the means of knowledge not possessed by the average applicant for insurance."

My market is principally working with lawyers, accountants and other professionals. These clients are a very demanding and knowledgeable bunch. Even their experience and education though don't prepare them for the complexity of choices in disability and life insurance and for the degree of disclosure demanded by insurers and, I am advised, by Canadian courts. Getting the information that we need to make our recommendation is still no easier when dealing with these clients than with any others.

We live in a highly litigious age. What this means is that, when a problem occurs, and especially when a claim isn't paid, someone is sued. If we do our job properly it will not only reduce the likelihood of a claim being denied, it will also substantially reduce the chance that we will be sued. So how do we do our job properly?

The first thing that we have to acknowledge is that we cannot always expect to sell insurance at every meeting. What we can generally expect is the following:

1. in the first meeting (whether in person or on the telephone), to enter into discussions with the prospect with regard to their needs, desires and current plans (current coverages in force and wills, agreements, etc.). At the end of this interview copies of documents and policies will have to be requested to allow for a meaningful report to be prepared;

2. in the second meeting, to present recommendations resulting from the first interview and research completed in the interim. This will require a great deal of thought between the first and second meetings, not the least of which will be the writing of a comprehensive report;

3. in the third meeting, to complete any applications to be submitted; and

4. in the fourth meeting, to deliver the policy(ies) and present a report summarizing coverages placed, and additional recommendations made, but not yet acted upon.

Bye the way, those who expect to make sales in the first interview might want to stay away from the professional market. For those who like the challenge of presenting thorough work to clients, on an ongoing basis, this may be somewhere for you to begin to prospect.

Professionals are generally sceptics. They are also generally better educated and more accustomed to thinking problems through. Because of this it is very difficult to sell to them based upon emotion. In fact, an emotional approach will often alienate professional prospects. What they do like is full substantiation. If you say something to them, be prepared to put it in writing, and to back it up with third party documentation. They may not challenge your information every time, but they will, in most cases, check it out before buying anything.

So be prepared for:

1. more work than with many other "target markets";
2. a longer sales process;
3. more ongoing service;
4. a clientele with rapidly increasing incomes, and decreasing amounts of time to spend;
5. a very faithful clientele, once you have earned their respect (and can keep it);
6. more competition than in many other markets; and
7. better than average sized sales.

The application is the first and best source of information that is provided to the insurer by the applicant. Since the application is the way that the applicant discloses their financial and medical history to the insurer it must be fully and accurately completed. Unfortunately, many applicants and agents fail to understand how serious a lapse of memory can be. Insurers maintain that they have the right to void policies at any time, not just during the incontestability period, if they determine that anything was either not disclosed, or not properly disclosed on an original application or in other information provided during the underwriting process.

In consequence of this we are constantly looking for better ways to explain the need for full disclosure and to make our clients focus on the application for enough time to complete it accurately. This process begins with a brief explanation of the need to allow the insurer to adequately evaluate the risk that they are being asked to take on. It continues through the time that we are completing the application and is indicated to the applicant by the way that we ask the questions. If we treat the application as incidental to the sale of the insurance, in other words as a formality, then we are telling our clients that their answers don't matter. That would be an error in judgement. The answers may well be all that matters.

One method that I have found effective is to ask the client to complete the application themselves. I ask the questions, we discuss the relevant history, they fill it in. Once the client understands that it is their application they are half way to understanding that their answers are important. The detail in which we discuss their answers brings them the rest of the way.

I know that I have adequately conveyed the message if the client calls the next day to discuss the things that they have remembered that were not initially disclosed. Clearly, in the completion of an application, haste makes waste. It may also expose us to liability.

Once we have taken an application we need to determine the substantiating documentation that will have to be provided to the insurer. In almost all cases tax returns will have to be provided. Even if they are not requested by the insurer it might be wise to supply them as proof that the applicant qualifies for the requested coverage.

Additional forms or questionnaires may be required. Back Pain, Chiropractic treatment, asthma, prior cardiac history, less common sports or avocations all immediately indicate that more information will have to be required. These should be supplied to the insurer with the initial application, if possible.

When an applicant has something in their medical history that requires clarification an Attending Physician's Report will be required. Insurers have two methods of requesting these reports, either as a form with spaces to be filled in or by way of questions. Either way, the more complete the information provided by the Attending Physician the greater the accuracy with which the application can be underwritten. Applicants should be encouraged to contact their doctors to discuss the fact that the insurer will contact them, and to ask that the doctor take care in the answering of the questions asked. I have seen more than one problem result from hurried completion of APRs.

If the applicant's duties are detailed or specialized an additional disclosure may be required. Often the space allocated on an application is not sufficient to fully answer the questions asked. Any time that this occurs we simply add an addendum to the app. When we are describing exact duties this will often be the case.

Ongoing service to clients begins with reporting at delivery regarding the terms and conditions, exclusions and limitations and premiums payable for the policy issued by the insurer. Any changes from the coverage applied for must be fully disclosed to the client.

Most disability policies include guaranteed future insurability riders. These riders generally allow policyholders to increase their coverage annually, on their policy anniversary. This is the perfect opportunity for us to make our annual report to the client and to reassess their need for additional coverage. I find that many clients are confused about these options, and that the option letters provided by insurers do little to help the client to make an informed decision. In light of this we have developed simple spreadsheet reports that we send to each client each year while the option is available to them. These spreadsheets show the client's current coverage and premiums as well as any other coverage, such as group LTD, and show a range of incomes from the income last proven to the insurer to the income required to exercise the maximum option that is then available. Even with this I find that we have to talk with the client about their options every year, this just makes it easier.

Ongoing service also involves reviewing the client's need for other forms of insurance protection. I find that the annual review is an ideal time to talk with the client about how their financial, business and familial situation has changed. If there has been a change I undertake a new review for the client. Group life insurance may have been part of an employees insurance plan and, if the client has left their employer, the amount of coverage should be reviewed.

An individual who has started a business or is now out in practice on their own may be responsible for the payment of expenses that should be insured with business overhead expense coverage or funding for a Buy-Sell Agreement.

The duties of the client may have substantially changed since the application was written. Their residence or business address may have changed. These should be confirmed annually with the client and any changes should be reported to the insurer.

Ongoing service involves the regular review not just of the clients' present and future need for security and the appropriateness of their insurance and financial product mix, but also of the stability of the institutions that the client is dealing with. I am by no means suggesting that we each need a crystal ball with which to make predictions about the future, but rather that we are expected to report to clients independently of the financial institutions as to changes occurring. Among these changes may be mergers and acquisitions, changes in management or management philosophy, changes in underwriting and claims settlement and management practices, changes in marketing strategies and changes in the industry rating of the institution.

As insurance agents we probably have to know our clients even better than those who sell financial products only, since we have to know not only their financial philosophy and objectives but also their medical history and long term needs for insurance company products. We are expected to anticipate a client's insurance needs and to make recommendations as to solutions. This is generally what we do now, but we will have to become much more consistent in being proactive. We also have to put just about everything in writing so that we can prove that we have indeed done as required in making comprehensive recommendations.

A major part of our duty to a client is to provide advice about their insurance needs and their options. We also have to make recommendations that our clients can act upon. As in all things, timeliness is very important.

People are busy. Often the last things on their lists are their personal chores. Insurance is often at the bottom of the list. Lawyers tell me that they get calls from clients about their wills the night before the client goes on vacation. My experience is similar. I have delivered more than one policy at 8 p.m. on the night before one of my clients goes away.

If there are any changes to be made, it is often too late to make them before the client gets on the plane.

I encourage my clients to contact me in anticipation of any changes that they may make. I point out to them that, as their agent, I need lead time to make sure that I can properly advise them. We also track changes in addresses or telephone numbers, announcements, and other correspondence to determine whether I should, proactively, contact the client. For the most part this works, sometimes it doesn't.

Every now and again we find out that a client moved and continued to receive their correspondence from us through Canada Post for up to a year, without contacting us with their new address. When mail is later returned to us we have quite a chore finding them again. No system is perfect, but we continue to try to refine ours.

We try to send at least 4 informative mailing to each client each year. This gives us some notice if a client has moved. We try to speak with every client at least twice a year, even if the call is purely social. If we have an e-mail address for the client we try to send one informative or humorous message every month. All of this is so that we know that we have an accurate way to easily contact the client, if we have to.

One agent who I spoke with about this thinks of it as becoming business people. Another thinks of it as being a professional. Both, in my estimation, are right.

We meet with everyone who wants to discuss their financial situation. We make suggestions. We discuss alternatives. We don't just tout the flavour of the day. We take a long-term approach to our clients' needs. This often means that we make suggestions that clients decline to act on.

Just try to get even that level of service in a branch where you have to wait in a line up.

We monitor our clients' coverages and savings individually. We try to review them with the clients at least annually, whether or not the client asks for a review. We contact the clients. Only occasionally do they have to call us more than once before getting an answer to their questions.

We act for the clients, not for the insurers, no matter what any relevant contract or legislation says. And the clients know it without our telling them. Customers know who branch employees of the major financial institutions work for. And they certainly have no question who's interests those employees look after. When was the last time one of those employees went to bat for you with their head office?

When was the last time you went to bat for one of your clients?

All of this comes down to the difference between a customer and a client. We always know who is paying us. There is no question in our minds that the loss of even one client is a major loss. The loss of that client because of a lack of service would be the worst thing imaginable for us.

We understand that referrals are our most important source of work. We understand that most referrals to new clients come because we have exceeded our clients' expectations of us.

While many of us advertise, we understand that that is for name recognition and that it is seldom a major source of income for us.

We make our clients one at a time.

None of our clients walk out because they have to wait.

We have no monopoly on service. It is possible that, in time, the level of service that we provide will become the norm.

We have a right to be proud of what we do. We have been providing this level of service for as long as anyone in our profession can remember. It is not a gimmick for us. It is not a slogan, it is an integral part of the way each and every insurance agent in the country works.

15. / 16. Independent Life Insurance Brokers of Canada

Advanced Disability Insurance
By: Lawrence Geller

CFP*

This presentation by Lawrence Geller is intended for brokers who consider disability insurance a major component of their practice or intend to specialise in disability insurance. Graduates of his "Intermediate" Part 1 & 2 are welcome, but may find the content over their head.

(15.) Part 1 - Writing the bullet-proof application: providing documentation and substantiation of information provided and creating a reasonable expectation of the performance of the product purchased.

Due to the nature of this presentation I will probably be unable to take questions. I believe that the entire speech will be reproduced on the Marketing Options web site in the very near future.

We work in a highly competitive world where, to succeed in obtaining and keeping clients, we must advertise our services and our expertise. Whether we do this in the media, in promotional material, in letters to prospective clients or verbally, we create an expectation in the minds of our prospects and clients that the services that we perform will meet a professional standard. If we hold ourselves out as experts it may well be that this standard is elevated.

It is my sense that, at a certain point in the process we, as agents, create a duty of care when we offer to obtain a specific form of coverage for a client. It is likely at that point in time that we become their agent. From that point forward we must exercise the degree of care that shows a demonstrable commitment to obtain the insurance for the client.

This commitment includes the right of a client to know what they are purchasing. In order to know that they must also understand what their options are, and which of their problems a product is intended to cover. They must be informed about the terms and conditions for the continuation of the coverage and for benefit payments to occur. They must also be clearly informed of any provisions in the coverage that would tend to limit or avoid the payment of benefits.

If you attended my speeches yesterday, I apologize for repeating myself here, but please indulge me for a moment. I recently read a definition of the Standard of Care that said:

The article went on to discuss an American case in which the decision, in part was:

and in another case the decision read, in part:

I live in a world that principally involves the sale and service of disability insurance. While we do sell life, group and CI as well, many of my examples will be based on disability insurance. It is my sense that most of it holds true for any sale of financial products.

We begin the process with our clients with an open and frank discussion of their financial situation. We discuss their income and how they earn it. We discuss what it takes to do their job the way that they do it. We discuss their investments, or at least the amount that they have in savings. We discuss their need for continued income in the event of a disability. We discuss their family, and what they want to happen. We ask about their current insurance.

We also discuss their hobbies, their sports and avocations.

If we are smart, it is at this point in the process that we also discuss their health in an attempt to uncover any medical insurability issues that may exist.

We may then be in a position to make a recommendation regarding the types of coverage that might be advisable. This should also include a discussion of any other reasonable alternative types of coverage that might be available to the client.

It seems to me that we must also discuss the client's expectations regarding the performance of the products that they are considering. If their expectations are reasonable, then we can proceed with the application to the insurer. Otherwise an in depth discussion of the way that the product may be reasonably expected to perform should occur. This may include:

1. the way or ways that an elimination period may be satisfied;
2. the definition of disability that will apply;
3. the medical and financial evidence that will have to be provided to the insurer;
4. the right of the insurer to examine them; and
5. any duty to mitigate that may exist.

The client will now be in a position to make an informed decision to apply for the type of coverage that they feel is most appropriate to their needs.

Now the in depth questioning as it applies to answering the questions on the application begins. We must explain to the client that at all times during the underwriting full and complete disclosure must occur. We begin this conversation by explaining both the incontestability period and the nature of misrepresentation and its possible consequences. We explain that the insurer has a right to make a full determination of the risk that we are asking them to accept. If this right is not afforded to them, then they may void the policy at any time, including when there is a claim. We further explain that the reason that they are buying the insurance is so that it will perform if a triggering event occurs and that it will be of no value if the insurer can get off of the risk at that time.

Now we are ready to take the application. My personal preference is to have the client complete the application themselves. I don't abdicate the responsibility entirely, I just like to be sure that the client's answers to each question are fully and accurately recorded and to assure, as best I can, that it is their answers that have been recorded. I ask the client each and every question on the application, whether I believe that it applies to them or not. In order to attempt to assure consistency I have developed a fixed word track for each question on each of the applications that we see. I can then ask that question of each applicant in exactly the same way. After each question I explain what it means, as I understand it.

An example of this might be the question regarding the existence of a presumptive disability. I explain that the question asks if there has been any partial or total loss of vision, impaired hearing, disease or disorder or the eyes, speech or ears. I then ask if they wear glasses or corrective lenses. This sets the stage for the degree of disclosure that we will be making. We will, as an example, disclose corrective lenses since age 6 for myopia and astigmatism. The client will often ask why we would give such a complete answer to which I respond that the insurer has the right to be fully informed of the risk that they are being asked to assume. Whether the answer will affect the issuance of the insurance is moot, since a failure to disclose may allow the insurer to void the policy even if a claim is made for an entirely unrelated problem. Since it costs nothing to make the disclosure, why would we not be willing to make it?

Another example of this will often occur when we ask the smoking question. I comment on the wording of the question and point out that the application asks about any use and ask whether they have smoked a cigar or anything else on any occasion, even once in the prior year or two. Again this sets the stage for the degree of disclosure that will be made in answer to all questions on the application.

I again reinforce this with the sports and avocation question. I ask the clients what sports they are involved in. Do they play hockey (pick up or league, contact or non contact, how often? Do they ski (and I ask where they ski and how often), do they run for exercise (on a track, in a gym, on the streets, how often, how far)? Each of these questions is intended to make the client think about the degree of detail that I expect them to disclose to the insurer.

I must stress that every question is important. If the question is subjective (as in do you drink to excess) then I point out to the client what the conventional wisdom seems to be about what is excessive. This is the one place that I feel that insurers expect us to stick our necks out and give an opinion as to what answer would be appropriate. As such it is also the one question that I take even more care in asking.

Often I find that I have to encourage clients to answer more completely than they would like to. Each time that this occurs I emphasize the value of the insurance, if it is in effect when they need to claim benefits and the possible jeopardy of answering any question incompletely.

The veracity of certain answers in applications may have to be proven at the time of a claim. Since most claims may be expected to occur many years after the date of the application, it will generally be much easier to provide the evidence to the insurer with the application than to try to find it when a disability has occurred. Things such as employment contracts, partnership agreements, financial statements, stock option plans etc. should therefore be attached to an application so that they do not have to be found and provided at a later date in addition to the income tax information required to prove that the client qualified for the insurance purchased.

Some clients split their income with family members and / or family trusts. Where this occurs it should be fully disclosed to the insurer at the time of application and a determination as to whether those amounts will be considered as a part of the income of the insured should be made by the underwriter and confirmed to the client. Copies of financial documentation showing the accounting trail for these income amounts should be obtained.

Some clients have an element of their income that may not be dependant upon their ability to work. Some may receive trailers, others may have unearned dividend income from their businesses, yet others may have employees who are substantially responsible for the income of their business and in certain cases that income would continue for an extended period of time even if the client was totally disabled. This should be discussed with the client and their financial advisors to determine whether that portion of their income that might be expected to continue should be insured. In any event this must also be fully disclosed in writing to the insurer at the time of application to attempt to assure that it will not complicate any claim for benefits that might subsequently be made. A written confirmation from the insurer would be a useful addition to your client file.

Full disclosure regarding the work related duties of the client must be made to the insurer. While essential for own occupation policies this may also be significant for regular and any occupation contracts. It is my sense that the degree of detail regarding these duties that is supplied with the application will be an indication of the degree of detail that should apply at the time of a claim.

Since most policies define disability as the inability to perform the significant or substantial duties of the regular occupation, the prior reporting of these duties should be sufficient to indicate the relative complexity of the client's occupation and the interrelationship of those duties. Where a description of those duties is part of an employment contract or agreement this should be noted and reported to the insurer. The client should also be encouraged to report their duties again to the insurer if they change at any time in the future.

The client's health history needs to be fully disclosed. I explain that anything that is in their history is already there. It can do no more damage if admitted than if hidden. I further explain that, if admitted, they may be covered for something that would otherwise allow the insurer not to pay a claim.

I make sure that we are both looking at the same page, and the same question. Then I start reading the medical questions.

After reading the first I stop and say: "You note that it asks ever?" We discuss that this means anything that they know of, whether they actually remember it or were told about it by their parents as kids.

We continue through the application stopping from time to time as I repeat the warning about disclosure in one form or another. I find it useful to apologize a lot for my intrusiveness and to at least once, early on, point out that my job is to try to help them to get a valid policy in force, if it is possible. Most understand.

When we finish I ask them to go over the application later (since they have it and I don't) to make sure that they have completely answered every question.

I should explain at this point that I now take almost all of my applications by 'phone, so this is easy to accomplish.

I really know that it has worked if they call the next morning to tell me everything that they had forgotten. I worry if they don't call and just send the application in.

When the application arrives in my office I review it along with the notes that I took in the conversation with the client, checking to be sure that the client disclosed on the app everything that they talked with me about.

I then check to make sure that all of the supporting information is attached.

I then call the client to find out if there is anything else to be disclosed, to ask about any missing documentation and to go over the amount of insurance to be applied for, as well as the riders and expected premiums.

We then send a copy of the completed application back to the client. I encourage them to have a copy present when they have their medical exam so that they will have the medical answers handy. They are instructed to call me after the medical, giving me a chance to find out whether they remembered any thing else that should be disclosed to the insurer.

Time goes on, and underwriting proceeds at its own pace. I find that it is useful to give clients a status report from time to time during underwriting. At least they know that I haven't forgotten their application.

If anything develops in underwriting that may affect the issuance of the policy, as applied for, I contact the client as soon as I become aware of it to discuss the probable result and to get directions. If the underwriters have made a decision based upon erroneous information this is the best time to get the correct information to them. I have been amazed at how often this happens.

When the policy is ultimately issued it is checked thoroughly. Again I am amazed at how often we have to send policies back to be reissued because of clerical errors. Clients hate to see their names misspelled. Premium payable, age at entry, smoker status and even sex can be incorrectly stated in a policy contract.

The final report is then prepared for the client. This report contains a policy summary that we have developed. It also contains a letter summarizing the insurance, the copy of the policy provided by the insurer, a claim form, and information regarding filing claims.

I call the client to tell them that we finally have a correct policy and to again review the type of coverage, amounts and premiums. Exclusions and limitations are summarized. I tell the client that they will receive the policy by courier and ask them to call me when they receive it. We send it out that same day, if possible, otherwise it goes out the next day.

When we are sure that the client has the policy I call to make sure that it is correct. This is principally to give the client another chance to ask questions and discuss what they have bought. Occasionally it gives clients an opportunity to tell me something that they forgot during the application or underwriting process. We go over the policy provisions, premiums, limitations and exclusions and the review any amendments. The client is finally in a position to accept delivery and pay the annual premium.

Oh, bye the way, I also explain to clients the cost of insurance company financing of monthly premiums. The February 1999 issue of The Insurance Forum contained a table that shows the interest rates associated with fractional premium ratios. In other words, .09% monthly equals 18.6% annually, on a reducing balance. It isn't often that a client can get that sort of discount. Even if they borrow at the bank at 6.5%, and it isn't deductible, they are ahead.

It is all part of the process.

This all sounds more complicated than it is. We have procedures and we follow them as closely as we can. Some clients are annoyed by our checking and rechecking. Even they understand, when it is explained, that we are doing so in an attempt to assure that the policy will be in full force and effect when they need to make a claim.

Some clients are, I am sure, tired of my methods but they remain clients, especially the lawyers.

The whole process also allows me to determine what the client's expectations are. By confirming and reconfirming I encourage the client to realize that they are entering into a contractual relationship and that they must exercise care. In realizing this, they generally also understand that they are asking the insurer to make contractual commitments to them. Understanding these commitments is central to developing a reasonable expectation of the performance of a policy at the time of claim.
In discussing the insurer's right of rescission the client can be brought to the understanding of the dimension of the potential problem. It is then relatively easy to ask them to focus on the nature of the commitment that will be made to them.

Although many would argue that the policy wordings are only as good as the intentions of the insurer, I feel that the contract is the entire commitment. Management may change, but the contract will normally endure.

A client who doesn't understand the contract will often be disappointed. One who does will normally be satisfied.

We use a checklist with 18 questions consistently when we discuss or compare disability plans. I first wrote the checklist in 1982 and, although the plans that are available have changed, I still feel that these are the things that are important:

1. Is the plan (both the coverage and the premium) cancellable or changeable at the insurer's option?

2. Is the plan guaranteed to be renewable at least to age 65?

3. Is the definition of injury restrictive? Does it have to be independent of all other causes?

4. Are cost of living benefits guaranteed?

5. Will benefits be paid pro-rata to the loss of income earned during a partial disability?

6. To qualify for partial disability benefits does an individual first have to be totally disabled for a fixed period of time?

7. Can days required to satisfy the waiting period be accumulated or do they need to be consecutive?

8. Will benefits be paid for residual disability?

9. Can full benefits be paid if working in another occupation while unable to work in your own occupation due to an illness or injury?

10. Would income billed prior to disability but collected during disability have a tendency to reduce benefits?

11. Are benefits payable for the full duration of disability or for a lesser period determined by age?

12. Is guaranteed insurability an aspect of the contract?

13. Is guaranteed insurability related to increases in income?

14. Are emotional and psychological disabilities covered?

15. Are self inflicted injuries, while sane or insane, covered?

16. Is own occupation coverage available within exact areas of specialization? Is the own occupation definition permanent, or only available for the first few years of claims and does the definition apply to both total and partial disability?

17. How is the direct consequences definition interpreted?

18. Who is available to advise you during a claim? Is it a clerk employed by the insurer, or your agent?

My sense is that a client who understands these points will generally have a reasonable expectation of their coverage. It by no means replaces reading the policy contract. This is the only reliable way to know what the insurer has agreed to do, and under what circumstances they will pay a claim. Those are the specifics. This checklist is the least that I insist every client understand before they buy, but it is still far more general than I would prefer.

If I sound like a bear about his, you are probably right. My rule is: Whatever the client wants, the client gets, as long as it is legal, ethical; and they listen to my advice first. A major part of my advice is to understand what one has bought.

We started with the duty of care, and we end Part 1 with the same thing. I told you:

Every step of the way it is those things that I try to accomplish. Our methods are meant to remind the client of these things every time that we talk. Our correspondence with them is peppered with the same things. Even then we sometimes fail to get a client to understand.

Most of our clients remember only that we have talked about these things. It is not until a disability occurs that most people really care about their disability insurance. They know that they bought it. They know about how much they pay for it. They have it as a prudent measure to provide security. They don't care about anything else.

As long as we and they have records to remind us of everything that went on between us, and with the insurer. ... .

That is where we will go in part 2. To the time of claim.

(16.) Part 2 - How to assist, not hamper, a disability claim.

Suffering from a physical or mental and nervous disability is a traumatic experience. When a disability happens we begin to question ourselves, our worth to our employers and families, and to ourselves. Since most of us gauge our identify, at least in part, by what we do for a living, disability leaves a large gap in our self image. Add to this the financial strain caused by a lack of income and the pressure can become almost unbearable. The consequence is that some claimants begin to suffer from depression when faced with a physical disability, thus compounding the degree of disability.

Most people, regardless of their job, live at or above their income. This results in insufficient savings and the inability to take more than a month or two off work, whether for a vacation or due to a disability. After two or three months without income the strain of meeting financial commitments can become overwhelming, adding to the existing strain and magnifying the problem in the mind of the claimant.

To protect themselves from this situation, many people buy disability insurance. They expect that, if they are disabled, their claim will be paid according to the terms and conditions of their policy contract. Unfortunately some insurers consider this to be an entitlement philosophy. Thus the claim may be considered to be suspect. I find this somewhat confusing myself, so we should go over it briefly.

I buy insurance on my home so that, if I incur a loss, I will be indemnified. I buy the insurance out of prudence, with the expectation that I will be paid if a claim occurs. I don't expect a claim, but nonetheless feel that I have to act as though one is probable.

I buy life insurance so that, when I die, my spouse and heirs will not be left with a financial problem. This too to me is prudent. It does not seem unreasonable for me to expect that the death benefit will be paid upon my death.

So why is the entitlement philosophy so often described as being a problem by the claims people at disability insurers?

Disability insurance is somewhat unlike other forms of insurance in that the cause of the loss is very important and sometimes can be difficult to establish. When I die I am certain that there will be no problem diagnosing death. If my home is broken into that too should be easy to established. If I am disabled I will have to prove that I have suffered from a disability and that any financial loss that I incur is the direct result of that disability.

This proof will often be evaluated according to a set protocol, by the insurer.

The classic example of this may be that of the professional, insured for $10,000 / month based on earnings of $350,000 per year who's income is reduced to $175,000 per year due to the economy. Insurers sometimes contend that this individual might be better off financially to make a claims, and thus more likely to do so.

My sense is that many people are affected quite differently by similar conditions. Some people with ruptured or compressed disks have no symptoms. Others are totally immobilized.

Some people with heart conditions recover quickly, others have long lasting effects.

Some with cancer are able to work throughout their treatment regimes, others are incapacitated.

Trying to apply averages and standards to these types of conditions may be unfair to most claimants. Yet insurers feel that they have to have benchmarks to adjudicate claims to create consistency in their treatment of claimants. Their sentiment seems to be that to treat each claim individually would be to expose themselves to abuse by claimants.

As an example: a few years ago one of our clients had a major myocardial infarction resulting in his being off work for over six months on orders from his attending physician, who happened to be one of the pre-eminent cardiologists in the country. On the 180th day after his heart attack he received a letter from his disability insurer stating "the American College of Cardiologists has found that the likelihood of recurrence of an MI six or more months following a single occurrence is no greater than for an individual who had no such condition. In view of this we enclose your last benefit payment."

They didn't check with the claimant. They didn't consult his attending physician. They were unaware that he had suffered several silent M.I.s after the first one, and that they had just been diagnosed. They followed procedures.

Another example: A client suffers from Breast Cancer and had a mastectomy and chemotherapy. Six months following the surgery the insurer wrote to her advising that, in the opinion of their medical consultant she should be fit to return to full time work. They simply asked her to advise them that she had, in fact, returned to work. They were not aware that she had been diagnosed with additional tumour that also needed to be removed surgically. Over the next 3 years they repeatedly did the same thing, trying to terminate her claim. Each time she had suffered a recurrence. She was completing the required monthly paperwork, and providing an APR on time, and her condition was clearly noted in both.

It would have been easy and inexpensive for the insurer to have done a bit of research before trying to terminate these claims. The adjudicator could have spoken with the claimant. It would have shown respect for their individual circumstances. They did not check, they applied their standard rules and caused the claimants great, and unnecessary, anguish and concern. They did this because their standards are not established to create the easiest path for the claimant and because it is their philosophy that disabled policyholders are not entitled to benefits, they are paid at the insurer's discretion.

Any claimant who is an active advocate for their own claim may improve the outcome, just as they do with the management of their medical treatment.

Some insurers have forgotten why people buy insurance. They buy so that they will reduce the inevitable financial consequences of disability. They buy because they are prudent. They buy so that they will be paid in the event of a disability.

Understanding the problems that some insurers have with the entitlement philosophy will help to predict the behaviour of insurers to some claims and some claimants. It will indicate when reporting must be made more frequently than is generally required. Often it will indicate when multiple physician's reports should be provided even when only one is requested. It will also indicate when conversations with claims adjudicators should occur (although the only meaningful correspondence with an insurer is written in that it will form an accurately reproducible part of the record). None of this will eliminate the problem, but it may help.

Creating a positive, co-operative relationship with the adjudicator is far more productive than the alternative. They can help to walk you through a claim, if they choose.

I find that it is useful to explain this to clients who may be tempted to call and complain before they do so. It encourages them to deal, in the conversation, with their disability and to remain silent as to what they believe their rights to be. It is a shame that this would have to be considered, but it is a fact of life.

Insurers have the sense that many claimants are trying to defraud them. Their claims adjudicators feel that it is their job to substantially reduce the likelihood of such fraud. One statement that I have recently read from the industry stated that it was unfortunate that a few honest claimants would be adversely affected by such treatment, but that it is necessary.

When a client calls to tell you that they have an illness, or have been injured, an agent has two choices. They can give the client the company's 800 number and say goodbye, or they can offer to help.

So what sorts of disabilities do we most often see and how can they be dealt with so as to reduce the stress of a claim for benefits?

a) mental and nervous:

- generally progressive, so at the beginning they are partial or residual disability -

filing claims early will:

- avoid disputes from insurers who suspect all claims that are submitted after the end of the elimination period - one claims director has recently stated that he suspects all claims that are filed after the 30th day;

- allow for early intervention from MD - probably not initially pharmacological since an accurate and reproducible diagnosis will be required by an insurer for a claim to be honoured and some claims have been substantially complicated by medication being prescribed before complete diagnosis has been made. N.B. many insurers are more reluctant to honour M&N claims when treatment is being provided by a psychologist as no medication can be prescribed and they feel that appropriate medication is essential to recovery;

- allow for early participation in rehab - the less time that a claimant is off the better the chance that they will not be totally and permanently disabled - better for the self confidence of the claimant - promotes better self-esteem - less financial and emotional stress;

b) cardiovascular:

- generally sudden - and then gradual recovery - may never be able to return to full time work

- proof needed by insurer that residual disability is due to illness since American College of Cardiologists has stated that likelihood of recurrence after 6 month no greater if no scarring if return to work

- need base line of health so that if an IME is done we know whether it was done on a good day and shows little impairment due to that

filing claims early will:

With all of this in mind, how can we, as agents, try to help claimants make their claim for benefits with the fewest problems? An agent who for the first time encounters a claim might be well advised to seek input from other, more experience, disability producers.

When a claim is first reported to an agent a discussion of the cause, or causes, of the disability should generally be had with the claimant. In addition, the terms and conditions of the policy, including the elimination period and monthly benefit, should be reviewed with the client. If there is a problem with the claim this is the first, and best, opportunity that the agent will have to determine what it will be and whether it can be easily resolved. The claims process, documentation to be provided and the possibility that the insurer will want to exercise their right to medically examine the claimant should also be discussed at this time.

The most important thing in the process is to get notice of the claim to the insurer as soon after the date that the disability occurs as possible so as to preserve the claimant's rights. Even if the supporting documentation is not yet available, I would always recommend that a claimant give notice to their insurer by the end of the elimination period, at the latest. If the elimination period is greater than 90 days, I would still recommend that notice be given to the insurer before the 90th day. Not long ago I was told that some claims departments consider claims that are submitted after the end of the elimination period to be somewhat suspect. The reason that was given is that a legitimate claimant would always want to be paid as soon as possible. While I disagree with the characterization, I understand it and feel that, if it can be avoided, it should be.

Next I would try to get the most comprehensive medical report regarding the disabling condition as I could as part of the Attending Physician's Report. If possible this report should be in narrative form in addition to the required APR. Every doctor who has seen the claimant regarding the disability should be asked to complete an APR and these should be forwarded to the insurer.

The more information that is available to the insurer, the less likely it is that they will question the validity of the claim. I generally suggest that claimants keep a supply of blank APR forms with them, and that they ask each doctor who they see to complete one while they are with the claimant, and have a fresh recollection of the examination and of the matters discussed. This substantially reduces the time that it takes to have APRs completed and assures that the claimant is aware of the content of all APRs provided to the insurer.

I would try to supply the claimant's most recent income tax information in support of the claim. This is of great importance for partial and residual disability claims for which it may often be advisable to provide up to five years income tax information to determine the highest pre-disability earnings of the claimant in the allowable period specified in the policy contract.

If the claimant is still working, monthly income statements should be prepared and should be supplied with documentation of the ongoing monthly income stream and deductible expenses. If an income continuation agreement, employment contract or STD plan exists, these should be documented and then provided to the insurer.

I would ask the claimant to provide a detailed description of their pre-disability duties along with a statement regarding the time that each of these duties regularly took prior to the disability and a statement as to which, if any, of these duties they are still able to perform. If the disability has resulted in the claimant being able to perform all of their pre-disability duties, but with reduced efficiency or for a reduced amount of time, I would ask that the claimant supply a statement to that effect with whatever evidence is available.

I would review all of the above before sending them to the insurer to make sure that all questions on the claim form have been answered, that all dates match and can be accounted for and explained, and that the information provided is not self contradictory. I would also try to ascertain whether the limitations described could reasonably be expected to account for the disability that the claimant is suffering from and that they would also account for the reduction in the amount of work that the claimant is able to perform.

At this point in time it is generally advisable to review all of the information disclosed on the claimants statement and APRs or in the supporting documentation to determine whether there is any information that might conflict with the information provided on the original application for coverage. If there is a discrepancy it is imperative that this be discussed with the claimant to determine what the reasons for the differences are. If they cannot be adequately explained this may result in either the claim for benefits being denied or the policy being rescinded by the insurer.

At best though, I would expect these steps to reduce the likelihood of a problem occurring. We are not claims examiners and, to date, I have not been clearly able to establish the rules used by claims departments for evaluating some claims.

One thing that I am certain of however is that many claims departments distinguish between what they consider to be legitimate and illegitimate claims. I would prefer that this distinction was made between eligible and ineligible claims, but that is not what I hear said. The difference to me is that legitimate is a subjective judgement while eligible is an objective decision. Given this practice a claimant has to make an effort not to unnecessarily create any questions as to the legitimacy of their claim in the mind of the claims examiner.

Once the claim has been submitted to the insurer it is often useful to find out who the claims adjudicator will be and to follow up with them to assure that they have received all of the documentation submitted and to find out whether there appears to be any additional information or documentation that would aid in the speedy resolution of the claim. It may also be possible to get the adjudicator's initial opinion as to the validity of the claim.

Claimants must generally be under the regular and personal care of a physician, for the disabling condition, in order for benefits to be payable. Often the elimination period will not be considered to have begun until the first date of treatment by the physician. In some cases diagnosis alone will not be considered to be sufficient to trigger the claim. This may be discussed with the adjudicator who will be able to advise the agent of the company's interpretation of the policy wording. I find that it is useful to have reviewed all of the relevant wordings prior to the conversation with the adjudicator and to have a copy of the policy contract in front of me during the conversation. It is for this reason that we keep photocopies of all policies that we deliver in the client's file. Since wordings vary from policy form to policy form, it is not possible to rely on specimen contracts for this purpose.

Each conversation with the claimant or the adjudicator should be noted in the client's file contemporaneously (that is, immediately following) with the conversation. A date and time should be noted.

Follow up calls with the claimant should be initiated regularly and any change in the claimant's condition should be reported to the adjudicator immediately and a new APR should be requested updating the claimant's condition.

At the end of the elimination period the adjudicator should again be contacted to determine whether a claim is payable and the amount of the benefit that the claimant can expect to receive in the first month. The date of that payment should be established as well as the documentation that the adjudicator will want at the end of the first month on claim. If there is a problem with the claim it is likely that the agent will find out what it is during this conversation.

The matters discussed with the adjudicator should then be conveyed to the claimant. Any problems should be discussed and any possible resolution determined. The claimant should be informed of the documentation to be provided and a timetable for doctor's visits should be sought. Treatment should be confirmed.

When the first benefit cheque is due it is often useful to follow up with the adjudicator to confirm when it will be approved. The receipt of that month's claim form, APR and documentation should be confirmed. If any additional information is required that should be determined. If a refund of premiums is due, it too should be confirmed. If future premiums are to be waived this should be determined. If the waiver changes due to a change in the claim this should be reviewed.

From this point in time on, claims which have been recognized by the insurer as being the result of total disability will take little work. Monthly claimant's statements and monthly or quarterly APRs will have to be provided to the adjudicator and copies will have to be maintained by the client and would be a useful part of the client file. If the adjudicator changes, the claim should be reviewed with the new adjudicator. If the benefit is indexed the monthly benefit payment should be checked on the anniversary of the claim.

If the definition of disability changes after a period of time, a date, in advance of that date, should be flagged in the client file and in a day timer and the client should be informed.

If it has been determined, by the insurer, that the claim is other than for a total disability, the payment provisions for the claim should be reviewed. Monthly financial reporting will be required unless a claim for a partial or residual disability has a fixed monthly benefit. The nature of the report required by the insurer and a list of the supporting documentation to be provided with the report should be obtained and discussed with the claimant.

Some insurers may interpret provisions of their contracts differently than one would expect upon reading them. An example of this is the determination of net monthly income during a residual disability. In some cases the contract may read:

Net monthly income = Monthly income from your business or provision
- business expenses that are deductible for income tax purposes.

The adjudicator might however advise the agent that any monthly payments that were considered, by the insurer, to be larger than usual would be divided by 12 and that a 1/12 potion would be subtracted from the gross monthly income in each month. The rationale for this is that some payments may be for annual work, but billed monthly.

Again, this information should be conveyed to the claimant and any appeal that may be advisable should be discussed.

I note that this interpretation by an insurer does have a tendency to depress the monthly benefit payable and to cost the claimant, at the least, the monthly carrying cost on the outstanding deficiency in benefit payment.

Since, in this case, it is clear that the contract wording can not be relied upon to determine the probable payment that a claimant would receive, clarification of the insurer's interpretation of their definitions should be sought in writing. It would be wise to obtain a new confirmation for each claimant.

Arguing with an adjudicator, while momentarily satisfying, will seldom accomplish much. When I grow up I intend to stop doing it. They are mostly, in my experience, excellent quality professionals who are subject to internal policies.

I should note that some insurers prefer to deal directly with the policyholder and others may allow the agent to act as intermediary. In the former case an agent who wishes to help may end up simply directing the necessary steps from behind the scenes.

In the latter case instructions from the claimant should be sought on an ongoing basis. Copies of all correspondence should be approved by the claimant, in advance. All conversations with the adjudicator or any other individual regarding the claim should be confirmed with the claimant both before and after.

In any event, the lawyers whom I have consulted tell me that I may have some duties to the claimant. It would be well to confirm this for yourselves.

For partial disability where the benefits are paid pro-rata to the loss of earnings the claimant may be required to submit a form with their monthly claimant's statement and APR detailing their earnings and deductible expenses for the month. Insurers may request that these expenses be substantiated with copies of original bills. Some claimants seem to be unable to cope with this task. Since the form to be completed is simply a spreadsheet, an agent may want to automate the process to aid these claimants. Again copies of all correspondence should be kept in the client file for future reference. I find that it is useful to copy all information submitted as it may have a tendency to be misplaced from time to time given the complexity of some insurer's claims systems.

In some months a claimant's loss of net earnings may be less than the 20 - 25% required under most contracts before a benefit is payable. These claims should be reconciled to assure that the calculations have been accurately performed. It is not unusual, in my experience, for differences of opinion, regarding the amount of deductible expenses allowed, to occur due to an insurer's interpretation of their policy wordings.

The claimant should be advised of the status of the monthly claim as soon as it is determined. If they disagree with the claim amount payable or the deductions allowed this should be appealed in a timely fashion.

After a period of time some claimants may find that their interest in a business or that a part of their professional practice should be disposed of to assure that it does not erode in value. Insurers may feel that this taints the claim and that an economic loss, rather than a loss due to the disability, is the consequence. As such any disposition contemplated should be reviewed with the insurer prior to a final decision being reached. It may be useful for the claimant's accountant and lawyer to be parties to this discussion with the insurer and for there to be follow up correspondence.

It should be established whether the insurer will deem some or all of the reduction in earnings of the claimant to be due to the sale of the practice. I find this somewhat confusing, but acknowledge that it may occur.

At some point virtually every claimant will be visited by a field representative of their insurer. It would often be wise for the claimant to be joined by another individual and for both to record the matters discussed with the field representative contemporaneously with (as the lawyers say when they mean right after) the meeting.

Generally this meeting will be to discuss the claimant's situation and any treatment programmes and plans for the claimant's return to work. Occasionally the meeting will be of a much more serious nature. I often find it useful to talk with the claimant prior to this meeting and to review their treatment regimen and plans with them. Seldom has a field representative, in my experience, agreed to meet with the claimant if the agent is present. An agent may, however, wish to ask whether they can attend if the claimant asks them to.

Many claims will go very smoothly. Others may be in constant jeopardy of being denied. A claimant's expectations may often be the key to simplifying problems.

A claimant who is disabled due to an intermittent condition should expect to return to work as much as they are able. The same is true for a claimant who is partially disabled, or alternately partially and totally disabled. An insurer might not agree that the availability of the claimant's prior job is a factor in the claim. That is to say that the claimant may be expected to find alternative employment in their field if they are not totally disabled.

A claimant who expects to receive the total disability benefit under these circumstances will often be disappointed. In some cases an insurer may terminate benefits entirely if their policy states that residual disability can only exist while the claimant is working. As such, even if the claimant is able to earn less than 20% of their pre-disability net monthly earnings they should consider returning to work as much as they are able and as soon as possible.

Own occupation policies may reduce these claims difficulties, but can not be relied upon to eliminate them. This does not in any way affect my opinion that, whenever an own occupation policy is available it should be considered. I also believe that an own occupation policy that provides the own occupation definition for residual disability should be considered before one that has the definition for total disability only.

Disability policies are not meant by insurers to be bridges to retirement unless the disability continues to age 65. They are meant to indemnify a claimant for the loss of earnings that occurs as the result of their disability. This should be discussed with claimants.

Often, having been on claim for several years, a claimant will not understand that their claim can end, or that their benefits can be reduced, if they recover to any appreciable extent. This should be reviewed with the claimant from time to time to assure that they realize that this is not something that they can control. Rather it is determined by their condition at any time and by the medical opinion as to their ability to work.

Insurers will often order periodic medical revues of claimants. These may be limited to a review of their medical history, or may include IMEs and FCAs. Under all of the policy contracts that I have seen this is the right of the insurer. A claimant who resists this type of review will often jeopardize their claim. On occasion these reviews will indicate that the treatment that the claimant is receiving is not appropriate. While I concede that this would seem to be a simple difference of opinion between doctors and that this sort of thing is probably common, under no circumstances should it be ignored by the claimant. Most policies provide that the claimant must be receiving appropriate medical treatment. If they are not, the claim may be terminated by the insurer.

A claimant who is asked to attend an IME or FCA by their insurer may wish to consider arranging an appointment with their own physician or specialist for the day following the examination by the insurer to assure that they have not pushed themselves too hard in the attempt to perform to the examiner's expectations. It may also be prudent for the claimant to make note regarding the examination as soon after leaving the facility as possible and to keep a record of their activities in the following few days.

Insurers may request that claimants record their daily activities for a period of several days to a few weeks. This is an onerous task that is resisted by many claimants. Even those who initially agree to maintain a log often fail to do so after a few days. This may be a reasonable requirement and the adjudicator may be consulted to determine the insurer's reason for wanting this record. I am not aware of any contract that makes benefit payments conditional upon such a record being provided to the insurer. None the less a claimant may often benefit from maintaining a record of their daily activities. For some causes of disability this record might aid the physician in determining factors that trigger recurrence or aggravate conditions or symptoms.

Rehabilitation is increasingly recognized by insurers as being a means to help claimants to return to work. My sense is that the shorter the period of time that a claimant is off work, the greater the likelihood that they will be able to reintegrate smoothly. Some occupations may not lead themselves to part time or reduced workload. This will be particularly true of occupations that require travel. If the insurer is willing to participate in vocational and other forms of rehabilitation as well as physical rehabilitation, if it is required, this should be made clear to the claimant.

If mandatory rehabilitation is a feature of the contract, this should also be discussed with the claimant.

I find that some issues that need to be discussed with claimants relate to the interpretation of the insurance policy contract. Fortunately many of my clients are lawyers and I do not need to suggest that their lawyer be party to these discussions. For the remainder of my claimants I would feel that it was important that the contractual interpretation be provided by their lawyer.

Every disability claim that I see is different. No hard and fast rules apply to the types of claims that I see. Disability is seldom black or white. Disability adjudicators must have the same problem with the claims that they see. Often, the more information that they have available to them, the easier their decision will be to make. If they see something in their file that they question, and there is no explanation of it, they will tend to disallow or reduce a claim. If a reasonable explanation is available they will often accept it. Preparing a claim for submission to the insurer is not a science. With due care, however, many claims will meet the claimant's expectations.

All that we, as agents, can do is to try our best to help our clients in a very difficult time. From then on it is up to the adjudicator to do their job objectively, fairly and in a timely fashion.