Why End-of-year Disability Claim Denials Are Common
Did you just receive a letter from your insurance company denying your individual or long term disability benefits? Unfortunately, you’re not alone. The end of the year is a busy time for denied claims and there’s a reason why.
It’s important to remember that insurance companies are, first and foremost, businesses. When your claim is denied, it’s personal to you. You might be worried about how you’ll manage to pay your bills and wonder how your insurance company could do this to you and your family.
Insurance companies generally owe individual policyholders a common law duty of good faith and fair dealing, which means they should be looking at the claim with an eye towards payment.
This is as important to remember as the reality that insurers don’t see the denial of your benefits as personal – to them, it’s just business. The way insurance companies operate explains why so many insureds receive denial letters at the end of each quarter, and at year end.
Insurance companies are businesses, and as such, they aim to be profitable.
Insurance companies report their earnings on a monthly, quarterly, and year-end basis. You’ll notice that denials issued at this time of year coincide with the companies’ end-of-year reporting.
One source of insurance profitability is the earnings from non-payment of claims. This includes net income as well as the reduction of financial reserves.
What are financial reserves?
Also called claims reserves, they are estimations of the money that will eventually be paid for the costs associated with a given claim. Insurance companies set up reserves to ensure they have enough money to pay out individual and long term disability claims that have been filed. Most states require insurance companies to set reserves on claims by law.
Why do claims reserves matter?
In short, insurance companies record claims reserves as liabilities on their balance sheets. By denying increased numbers of claims, insurers can move money from the claims reserves back into their company’s general fund.
As more claims are denied or terminated, more money can be moved back into the company’s general fund, and insurers can report greater overall earnings rather quickly. In this case, these denials would help reflect better earnings in end-of-year reports.
How to fight for your disability benefits
Overcoming a denied claim is easier said than done and receiving a denial right now can really sour a hopeful outlook for the new year. However, you have rights as a policyholder, and you should never give up until you receive the benefits you are owed.
The top rated long-term disability attorneys at DarrasLaw have more than 100 years of combined litigation and claim experience in fighting for valid individual and group long-term disability insurance claims.
If you are ready to fight for what you are rightfully owed, explore our website for more claim or litigation help, or contact our expert disability attorneys today. To schedule a free disability policy analysis and free claim consultation with one of our stellar long-term individual lawyers or nationally renowned group ERISA attorneys, call us at (800) 458-4577 or contact us online.