UnumProvident May Reassess 215,000 LTD Claims

A major disability insurer says it could spend more than $127 million to respond to regulators’ concerns about its handling of group and individual long-term disability insurance claims.[@@]

UnumProvident Corp., Chattanooga, Tenn., says its insurance subsidiaries have negotiated a package of settlement agreements with the U.S. Department of Labor, the New York attorney general’s office and a group of 3 state insurance regulatory agencies.

The agreements call for UnumProvident to volunteer to review hundreds of thousands of claims processed since Jan. 1, 2000, and to revamp its procedures for handling future LTD claims. The unit also will take requests for reviews of claims closed between Jan. 1, 1997, and Dec. 31, 1999.

If the company fails to make good on performance guarantees, it could end up paying an additional $145 million “contingent fine,” the company says.

UnumProvident says the settlement agreements will take effect if insurance regulators in at least 33 jurisdictions, or some lower number that UnumProvident accepts, approve the agreements by Dec. 20. If the agreements take effect, they would remain in place at least until January 2007, UnumProvident says.

UnumProvident negotiated the settlement agreements in response to a multistate market conduct exam that insurance commissioners from Maine, Massachusetts and Tennessee began in September 2003.

“UnumProvident is committed to handling customers’ claims in a fair, thorough and objective manner,” Thomas Watjen, UnumProvident’s president, says in a statement about the settlement agreements. “I am confident the steps we are taking in response to this review will improve the consistency and quality of our claims decisions.”

Insurance commissioners in the 3 states that ran the main exam reviewed many LTD claims opened, closed or appealed during 2 time periods from 2002 to early 2004.

“The purpose of the exam was to determine whether the long-term disability claims handling practices of [UnumProvident's] insurance subsidiaries reflected unfair claim settlement practices,” UnumProvident says.

Although the final exam report includes no findings of violations of law or market conduct regulations, it does identify “areas of concern,” UnumProvident says.

The insurance regulators in all of the states other than Maine, Massachusetts and Tennessee and 2 other jurisdictions also participated in the exam.

Regulators in Arizona, California, Minnesota, New Mexico and New York have been conducting exams of their own.

UnumProvident has agreed to pay $250,000 in penalties to resolve concerns in Minnesota, and New York has agreed to apply an agreement similar to the main multistate agreement to a UnumProvident subsidiary in New York, UnumProvident says.