Until the early 1990's, disability insurance companies concentrated their efforts on marketing to and writing policies for professionals, particularly physicians. Unlike many other professional groups, physicians were an especially attractive target because (1) physician's salaries were high, and (2) insurers considered physicians to be particularly dedicated to their profession as a result of their years of education and training, and thus less likely to stop working due to physical limitations. Furthermore, there was intense competition between disability insurance carriers because of high interest rates, each company vying for market share in order to obtain maximum premium dollars for investment purposes. Indeed, the level of competition was so high among disability carriers that it resulted in the extreme liberalization of policy terms and underwriting practices as follows:
- Policies were underpriced and coverage was significantly broadened to include a variety of conditions that would typically be excluded or limited in today's market, such as subjectively diagnosed conditions
- There were no caps on the amount of coverage that could be purchased by the insured
- Policies were non-cancellable and premiums were guaranteed not to increase
- Lifetime benefits were offered instead of benefits payable to age 65
- Occupation-specific coverage was provided
- Cost of living increases were common
- Monthly benefits were not reduced as a result of obtaining income from other sources
- Underwriting requirements were almost non-existent and applicants frequently obtained policies without filling out long applications, providing detailed medical histories and submitting to medical tests
In the early 1990's, everything changed. Interest rates plummeted as managed care emerged, resulting in a significant income decrease for most physicians. Many physicians grew frustrated and refused to continue working despite their physical limitations, opting instead to make claims for disability benefits that were equal to, or greater than, their modified salaries. From the early 1990's to date, tens of thousands of disability claims have been filed by physicians seeking relief under their liberalized policies, causing insurance companies to lose huge amounts of money and increase reserves. In fact, one of the largest disability carriers was forced to set aside an unprecedented $423 million for anticipated disability claims in 1993.
Late 1990's to Early 2000's
Because of the significant increase in disability claims, insurance carriers scrutinized the terms of their policies and any claims made thereunder, utilizing novel and creative theories when denying benefits for disabled doctors. At the same time, these carriers attempted to increase their revenues by significantly raising premiums on new policies, which provided far fewer benefits than policies issued less than a decade before.
Increased regulation and the pressures of a down economy have put insurers in a precarious position. Insurance companies are merging, reducing reserves, and going out of business altogether. For them, the late 1990's and early 2000's were about cost-cutting. Today, insurers are fighting just to survive. Under the weight of these demands, insurance companies have more incentive than ever to deny or terminate claims. In this environment of uncertainty, it is essential that disabled professionals, including disabled doctors and dentists, know how to protect themselves in the insurance claims process.