inbox: letters to the editor

CPA Journal, The, Mar 2008

Disability Insurance Planning: Don't Expect Claims Process to Be Easy

The article "Disability Insurance Planning for Professionals" by Lawrence B. Keller and Harry Wigler (December 2007) was very informative. Let me add some reallife experience to the discussion.

The authors hint at the leverage that the insurance companies have in determining ultimate benefit payouts when they discuss the "any occupation" definition as being up to the insurance companies to decide. This is the tip of the iceberg. The insurance companies hold a very strong hand when it comes to determining whether or not a claimant receives any benefit. They will show no mercy in interpreting the policy so that they pay little or no benefit.

If you are unfortunate enough to need to make a claim on your disability policy, specifically for a permanent disability, keep in mind the following:

* Do not delay in making the claim; delay can be interpreted by the insurance companies as proof that you were not really disabled, just unwilling to keep working. Delay can also negatively impact the earnings baseline used to calculate your drop in earnings due to disability, and your ultimate benefit.

* Put yourself under the regular care of a doctor specializing in your disability. Self-medicating and denial of your disability is fuel for insurance companies to deny your claim of a true disability.

* Check out the qualifications of the doctors that the insurance companies send you to for their independent assessment; this may give you leverage when negotiating your ultimate benefit.

* Find a qualified attorney to represent you, one who specializes in disability claims such as yours.

* Don't expect to receive the monthly benefit that you paid for. If the insurance companies do agree to pay, they prefer to pay a lump-sum settlement so that they avoid the long-term recurring impact on their financial statements. Having a strong disability insurance policy is an excellent part of a financial plan. But don't count on the claim process being easy.

J.B. Martin, CPA

New York, N.Y.

Debating the Efficacy of Sarbanes-Oxley

Regarding "Sarbanes-Oxley: A Bill of Goods" (Inbox, January 2008), I am tempted to ask the writer, Joseph Bencivenga, if I use his premise of the ineffectiveness of laws and regulations at a minimum SOX, men whether we should do away with them all. Less government, less regulation, and we will achieve nirvana and utopia simultaneously.

In the case of Citibank, there may be very good reasons that 11 months before there may not have been any evidence, indication, or existence of adverse factors that could have been observed by either management or the external auditors to cause them to raise an alarm at that time, and those factors subsequently did materialize over the ensuing months. This may hold true for Merrill Lynch as well.

I suggest that no man-made system is infallible; therefore, deal with it!

John Howard, CIA, CPA

Palm Beach, Fla.

The author responds:

When I wrote my letter, I did think about the issue of subsequent events and whether it was fair to criticize Citibank or KPMG for something that developed later and that presumably they could not foresee when they gave their assurances and expressed their clean opinion on internal control over financial reporting. However, management had to have known about the off-balance sheet exposure; and the auditors should have inquired about such exposure. Citibank's subsequent decision to put the off-balance sheet numbers on its balance sheet calls into question the issuer's and the auditor's prior assurances, which was partly the subject of my letter. Plus, the writer misses the point, which is that, despite Sarbanes-Oxley Act section 404, Citibank, Merrill Lynch, and other companies wrote off billions largely because of questionable internal controls. To me diat's an indictment of the efficacy of Sarbanes-Oxley.

Lawrence B. Keller, CLU, ChFP, CFP

Physician Financial Services

Observations on Financial Reporting, Past, Present, and Future

As I read the interview with FASB Chairman Robert Herz and the accompanying article on his remarks at the FEI conference in October 2007 (The CPA Journal, November 2007), the following droughts, among others, occurred to me:

1. As someone who worked in the international accounting area for many years, I support all the efforts underway to achieve greater convergence between international and U.S. accounting standards. However, it should be recognized that obtaining complete convergence in the published standards (if that is possible) is the beginning of the process, not the end. It is highly probable that reasonable people acting in good faith will sometimes interpret the standards differently; for example, because of differences in their backgrounds or the customs and legal requirements of theuhome countries. To use a personal example, my former firm established an international committee in 19% to write a book explaining the improved international accounting standards that had recently been adopted by the International Accounting Standards Board (IASB)'s predecessor, the International Accounting Standards Committee (IASC). Although four committee members (including me) had represented their countries on the IASC and had approved the new standards, from time to time we found ourselves in disagreement on the meaning of the standards we had just approved. The problem is not insurmountable, but users should realize that there will be a learning period in applying the conformed standards uniformly.