Life Waiver of Premium Claims - "I get no respect"

Nov 24, 2010

Some might say that life waiver of premium (LWOP) provision is the "Rodney Dangerfield" of group insurance. Customers don't understand the provision, claimants don't know how to file claims, and most importantly, some don't seem to give LWOP claims much respect.

It's a fact, life waiver of premium (LWOP) claims don't get the attention they deserve and clearly take a back seat to other types of group claims. Maybe it's because there is no cash benefit and therefore no claimant screaming for their check but LWOP claim management just isn't as popular or sexy as, say STD or LTD (thank goodness, I'm not sure we could take any more excitement in this business!) Really? We've heard several excuses including:

  • The return for managing the claims are small so we can't invest in claim management resources
  • We're saving the returns for a rainy day
  • Our customers don't care
  • It's an easy definition of disability to administer
  • We don't own the P&L

That's too bad. With a little respect and focus, the management of life waiver or premium claims could improve results and customer relationships. Although there is no "benefit", there are reserves established as some factor of the the face amount. On top of that, premiums are being waived. This seems like an important financial concern to us. From the customer's perspective, appropriate adjudication of the provision and timely, professional communication with claimants fosters a stronger relationship. In many cases, managing the waiver claim well can eliminate embarrassing situations that damage customer relationships forever. You wouldn't believe the number of waiver claims we uncover that are still open years after the claimant has deceased. That's a tough one to explain.

We've identified five areas that can influence results:

  1. Clearly define who and/or what department(s) is responsible for the results associated with LWOP and the administration of the claims.
    1. Whenever there is a disability benefit determination, a disability specialist should be involved
  2. Workload distribution
    1. Focused expertise is important. Don't mix products in the claim environment
  3. Interpretation of the "any occupation" definition of disability
    1. Provide the claim staff with clear guidelines and resources. It's not as easy as you think.
  4. Integration and/or coordination with the disability adjudication process
    1. The provisions often have different definitions of disability. Your customer may not understand that. Coordinate and communicate.
  5. Attention to key metrics - initial liability, reductions, change in definition dates

Maybe it's time to pull those LWOP claims off the shelf and give them the attention they deserve. Your CFO and your customers will thank you for it.

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