No disability insurance company will admit that they pay bonuses or commissions for claim denials. There are claims managers with many disability insurance companies that are paid a bonus based upon the overall performance of the company. We know this to be true from the numerous depositions and discovery request we have sent to every major disability insurance company.
Obviously, if the disability company denies more claims then the financial performance of the company will be better and the claim manager can receive a higher bonus. Claim managers are also always aware of the disability claim reserve for a block of disability claims. The reserve is a specific amount of money that an insurance company is required to maintain in order to pay the pending disability insurance claim. The reserve amount is usually at least 50% of the total value of the disability claim.
Every disability insurance claim has its own reserve depending upon the age of the claimant, amount of the benefit, and maximum duration of the claim. When a disability claim is denied, the Reserve amount comes off the company’s books and the company can now release a liability, which increases revenues and profits.