Report Says Unum in Compliance with Settlement

An examination of the disability insurance claim practices of Unum Group found the company is complying with the requirements of a 2004 agreement aimed at ensuring disability claims are promptly and properly processed, New York Insurance Superintendent Eric Dinallo announced.

Consumers whose claims previously had been denied will receive a total of $676.2 million in additional benefits, Dinallo said. More than 23,000 claimants sought to have their denied claims reassessed as part of the settlement agreement and 41.7% of these were reversed in whole or in part. New York claimants gained benefits worth $59.8 million.

This follows a 2003 investigation into whether the company had inappropriately denied claims for benefits under individual and group long-term disability insurance policies. That investigation was conducted by the New York State Attorney General’s Office, the New York State Insurance Department, state insurance regulators conducting a multi-state examination led by Massachusetts, Maine and Tennessee on behalf of all the other states, and the United States Department of Labor.

As a result of that investigation, the four states and the Department of Labor entered into the regulatory settlement agreement with the company in November 2004 requiring Unum to pay a $15 million fine, to reassess the claims that previously had been denied, and to completely restructure its claim handling procedures to ensure objectivity and fairness.

“This is a clear example of state insurance regulation at its best, working cooperatively to protect consumers,” Dinallo said. “Thousands of consumers with worthy disability insurance claims received their proper benefits as a result of this action, and future claimants now know the process will be fair and clear.

“Unum is to be commended for its cooperation and its prompt implementation of the required reforms,” Dinallo added. “Its governance reforms and improvements in claim administration should yield ongoing positive benefits for disability insurance claimants.”

The examination report was prepared by Rackemann Sawyer & Brewster on behalf of the states involved. It found Unum complied with the changes in corporate governance and claim administration procedures and actions required by the settlement agreement. The company’s error rate was now substantially better than the standards required by the agreement.

Unum faced possible penalties of $145 million plus $100,000 per day had it not complied with the settlement terms. Based on Unum’s performance, no fines or penalties will be imposed.