The Unum Life Insurance Company of America, Provident Life And Accident Insurance Company, and the Paul Revere Life Insurance Co., all subsidiaries of UnumProvident, have agreed to settle issues regarding claims handling and marketing of disability insurance policies sold to Minnesota consumers.
According to terms of two separate settlement agreements with Minnesota and other insurance regulators, the companies are required to reassess certain claims going back as far as 1997 and to pay a $560,000 civil penalty to Minnesota.
The Minnesota Department of Commerce initiated an independent market conduct examination of UnumProvident and then subsequently provided information and participated with the multistate effort that eventually included all 50 states, District of Columbia, U.S. Department of Labor, and New York’s attorney general.
The multistate settlement imposes a fine of $15 million, which will be divided on a pro-rata basis among the participating states based on the long-term disability income insurance premium in each state as of Dec. 31, 2003. Minnesota’s share is estimated at about $310,000.
The Minnesota Department of Commerce’s independent examination involved a review of UnumProvident claims and marketing practices in Minnesota through 2003. As a result, UnumProvident will pay an additional civil penalty of $250,000 to Minnesota, will change its claim file policies and procedures, and will review marketing materials for compliance with Minnesota law.
Following its examination, the Department of Commerce alleged that the companies violated Minnesota insurance law.
In some instances:
—Unum marketed their disability income policies without adequately explaining terms that may have impacted benefit payments;
—The companies failed to comply with claim handling time periods regarding acknowledgments, investigations, and claim inquiries from policyholders;
—The companies failed to provide clear explanations for the payment of benefits or claim denials;
—The companies failed to inform the claimant of all available benefits
—Unum failed to determine whether the recommended product was suitable for the applicant;
—Unum failed to pay interest or to properly disclose the interest paid on some life claims.
The settlement agreements require UnumProvident to:
—Offer, in writing, to reassess claims denied or closed since Jan. 1, 2000, for reasons other than settlement, death, or reaching benefit maximums;
—Allow for reassessment, upon request, of claims similarly denied or closed between Jan. 1, 1997 and Dec. 31, 1999
—Modify claims handling and benefit determination practices as specified by the agreements
—Improve accountability and oversight of claims processes as specified in the agreements;
—Enhance corporate governance by expanding the Board of Directors by three directors with insurance industry or regulatory experience;
—Establish claim file record retention policies and procedures and review marketing materials to ensure that the companies are in compliance with Minnesota law. The companies are required to submit their corrective action plans for review.
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