A disability insurer has announced a pair of broker compensation settlement agreements.
UnumProvident Corp., Chattanooga, Tenn., has negotiated one broker comp settlement with New York Attorney General Eliot Spitzer and a second settlement with the California Department of Insurance.
The New York settlement calls for UnumProvident to develop a simpler group insurance broker compensation program and improve broker compensation disclosure.
UnumProvident has agreed to stop paying contingent commissions for the sale of any group products and to provide full disclosure of broker compensation to employers and other organizations that buy its products on behalf of their employees or members, according to officials in the New York attorney general’s office.
UnumProvident also has agreed to stop making loans to, or obtaining undisclosed ownership interests in, insurance brokers; to pay a $1.9 million fine; and to put $15.5 million in a national customer restitution fund.
“These reforms, many of which were conceived by Unum itself, will help restore the integrity of the market and promote competition,” Spitzer says in a statement.
UnumProvident notes that it improved disclosure and eliminated compensation programs that provided loans, equity investments, contests and trips in March 2005, after investigators began raising questions about the company’s compensation programs.
Like UnumProvident’s New York broker comp settlement, the California broker comp settlement calls for UnumProvident to expand broker comp disclosure.
UnumProvident President Thomas Watjen says in a statement that the company has cooperated with authorities since broker comp concerns surfaced.
UnumProvident is hoping the New York and California agreements can serve as models for the entire insurance industry, Watjen says.