State regulators have negotiated a $32 million settlement with a major long term care insurer.

Conseco Inc., Carmel, Ind., says 2 subsidiaries agreed to the settlement to resolve a 40-state investigation of its Conseco Senior Health Insurance Company and Bankers Life and Casualty Company units.

“Conseco encouraged and fully supported this exam, especially in light of industry policymakers’ focus on senior marketplace issues relating to long-term care and spiraling health care costs,” Conseco Chief Executive C. James Prieur says in a statement. “As we expected, after an extensive review the examiners did not find that Conseco had engaged in a practice of improper claims denials.”

Conseco already has been working to improve the way it handles claims and complaints, and it is committed to meeting the settlement agreement standards, Prieur says.

The 40-state investigation, led by regulators in Pennsylvania, Illinois, Indiana, Texas and Florida, covered LTC insurance claims filed with the subsidiaries from Jan. 1, 2005, to April 30, 2007.

“Conseco self-reported serious issues in complaint and claims handling and blamed the problems on the challenge of integrating various computer systems,” according to officials with the Pennsylvania Insurance Department, which announced the results of the examination.

Regulators found during an on-site examination that most problems detected involved delays in claim payments rather than outright claim denials, officials say.

But the examination also found problems with recordkeeping and evidence of delays in investigations and of violations of rules governing speed of communications with claimants, officials say.

The settlement agreement calls for Conseco to pay a $2.3 million penalty that will be shared by all participating states, and to pay at least $4 million in restitution and administrative costs to harmed policyholders.

Conseco also has promised to invest $26 million in system upgrades and improved claims administration.

Conseco Senior Health, which is not actively writing new policies, must automatically review 1,112 claims that were initially denied, and it must send notices to another 18,000 policyholders covering 49,000 claims that may have been partially denied or rejected after Conseco started sending benefits checks.

Bankers Life, which is writing new policies, must improve its producer training program; eliminate producer complaint thresholds, so that a single complaint can result in disciplinary action; review experience-period results for all producers; and terminate producers who fail to comply with marketing standards.

Both Conseco Senior Health and Bankers Life must revise claims-handling procedures, speed up handling of complaints, create a centralized complaint data base and establish a countrywide contact for complaints.

Conseco also is hiring Long-Term Care Group Inc., Eden Prairie, Minn., to handle some LTC insurance support services.