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October 28, 2008

Disability Insurer Oversight: Just Ducky?

Last month we blogged the emerging scandal involving the Long Island Railroad, where over 90 percent of employees (management included) retire on disability. Walt Bodanich and Duff Wilson of the New York Times have a follow up article that goes into some of the deails. It's not surprising to find that workers were coached in the best way to apply for disability, including a select list of doctors and paying for their disability exams in cash.

One detail of the new report caught the Insider's eye. Two private sector insurers wrote coverage for railroad workers: Transamerica and Aflac. Transamerica has walked away from the (unprofitable) business. Aflac, on the other hand, has approached the scandal in a rather circumspect and casual manner.

Wlliam Capps, manager of Aflac's special investigations unit, testified at a hearing convened by New York AG Andrew Cuomo that since 2003 his company had paid out $4.1 million to LIRR employees holding short-term disability policies. He says that Aflac did not realize anything was amiss until this year. (Perhaps they read about it in the papers while enjoying their morning commute?).

Capps's investigation focused on three areas: the close proximity betweeen retirement and the submission of claims; the similarity of ailments; and the use of the same three doctors by most of the employees. Under questioning, Capps said that about a quarter of LIRR policyholders had cashed in on the coverage.

Twenty five percent! In this era of data mining and performance management, you would think that such a high level of disability claims would raise a few red flags. Private insurers are accountable for results on a quarterly/annual basis. There is no way they could make money on a disability program with such a high percentage of those covered drawing down benefits. You have to wonder whether the Aflac sales department ever gets feedback from claims, or whether anyone actual reads the performance data.

I can just see Aflac's ubiquitous duck in a new ad campaign: the duck is strapped across a railroad tie, with the LIRR commuter train heading straight for it. The duck quacks in alarm and scatters feathers in a desparate effort to escape. That's more than can be said for Aflac itself, which lay down on the tracks, closed its eyes and took a nap, while the 5:02 hurtled down the track on its scheduled rounds.

Posted by Jon Coppelman at 1:10 PM Link to, Comment (4), or E-mail this post
Comments

Are the employees really injured? Prove it or disprove it with another Certified Examiners diagnosis. The main question is, where are the safety experts for the LIRR? Is the management and union doing their job regarding safety/injuries? I am sorry AFLAC is not making money off LIRR, but perhaps their sales personnel were not looking at the risk factors of the industry and only wanted to make the sale...or the sales commission, but not assuring that the employees worked in a safe environment, so that AFLAC's investment was appropriate?

Posted by: Donna Sesock-Miller at October 28, 2008 1:44 PM

As the saying goes..."if it looks like a duck and quacks like a duck"...

Posted by: Mark Balduzzi at October 28, 2008 3:40 PM

Are we expected to believe that Aflac had no idea this was happening? Methinks not. Something is surely amiss.

This sounds like a different version of the shell game the government is playing vis a vis our financial crisis.

Aflac to the rescue??

Posted by: Andrea at October 29, 2008 1:29 AM

It would be interesting to see the premiums that are paid by LIRR for coverage. AFLAC only has to charge enough to cover the projected claims plus whatever margin they want...it could actually be quite profitable.

Posted by: Bill Halper at October 30, 2008 1:48 AM
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