CONCEPTS OF DISABILITY INCOME INSURANCE
CAL-STATE EXAMS
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TABLE OF CONTENTS
CONCEPTS OF DISABILITY INCOME INSURANCE
LESSON ONE – LIFE VS. DISABILITY INCOME
Overview - Contract Language - Rates - Selection and Underwriting - Claims Handling - Administration - Sales Government Influence
LESSON TWO – STABILITY AND MOTIVATION
Overview - Changes in the Work Ethic - Age of Entitlement - Governmental Coverage - Mid-1970s Recession - Changes in the Disability Business - Relationship of Stability to Claims Experience - Factors That Influence Stability Rating
LESSON THREE – OTHER DISABILITY COVERAGES
Overview - Group and Franchise - Limited Contracts - Governmental Coverage - Salary Allotment - Business Overhead Expense - Business Buy-Out - Key Person
LESSON FOUR – ECONOMY AND UNEMPLOYMENT
Overview - Increase in Claim Frequency - Increase in Length of Claims - Product Liberalization and Recessions - Preparing for Adverse Economic Swings - Social Security and Recession - The Mid- 1970s Recession
LESSON FIVE – CONTRACTUAL PROVISIONS AND EXTRA BENEFITS
Overview - Life and Disability Differences - Contractual Provisions - Occupational Extra Benefits - Live Vs. Disability Factors - Determining Insurable Income - How Much to Insure? - Net Earned Income - Overinsurance with Government Programs - Group Insurance Programs - Motivation - Claim Handling
LESSON SIX – THE DISABILITY APPLICATION
Overview - Similarities to Life Applications - Income Determination - Medical History Questions - Applicant’s Stability - Other Application Forms - Other Application Factors
LESSON SEVEN – UNDERWRITING TOOLS
Similarities to Life Insurance - Differences from Life Insurance - Underwriter Training - Department Structure - Medical Examinations - Attending Physician’s Statements - Other Medical Information - Inspection Reports and Information - Additional Income Information - Underwriting Use of Company Data
LESSON EIGHT – SUBSTANDARD UNDERWRITING
Overview - Comparison with Life Insurance - Types of Substandard Decisions - Scarcity of Reliable Data - Rate-Ups and Extra Premiums - Exclusion Riders - Elimination-Period Impact - Rejections - Disability Wastage - Underwriting Manuals
LESSON NINE – OCCUPATION SCHEDULE
Overview - Classification - Trend Toward Measuring Stability - Income and Stability - Length of Employment - Accurate Description of Occupation - Physical Impairments and Occupation - Occupation Schedule Changes
Overview - Motivation and Stability - Accident vs. Sickness Disabilities - Recessions and the Economy - Claim Procedures - Training - Contestable Claims - Claim Investigation - Claim Examiner Skills - Interpretation and Definition of Benefits - Rehabilitation - Available Morbidity Data
LESSON ELEVEN – GROUP DISABILITY BENEFITS
History - Comparison with Individual Disability - Premium Considerations - Underwriting Considerations - The Group Contract - Coordination of Benefits - Short-Term Disability (Weekly Income) - Long-Term Disability - Indemnity Amounts - Claim Handling - Multiple-Employer Trusts - Association/Franchise
LESSON ONE: LIFE VS. DISABILITY INCOME
Life insurance has been sold in large volume for a much longer period of time than has disability income, and therefore, the statistical base on which to make sound underwriting and actuarial judgments is much more reliable. Second, because disability in. come insurance is sensitive to the economy, it is much more volatile than life insurance and consequently carries more risk with it. The combination of a lack of credible statistical information and a volatile product may cause one to believe that the stability and reliability of actuarial data will never reach the level of industry acceptance we find in life insurance. Let’s take a brief look at some of the important areas in which life/disability income differences exist: namely, contract language, rates, selection and underwriting, claims handling, administration, sales, and governmental influence.
CONTRACT LANGUAGE
One of the most obvious areas of difference is contractual language. Although there are many language similarities, substantial differences are caused by the nature of the products being defined. Both types of contracts have insuring clauses, language relating to payment of premiums, notice of claims, incontestability period description, preexisting conditions, and other standard clauses. Beyond this, however, the disability income contract is somewhat more complicated because of its more numerous and technical definitions.