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Insurer Settles Broker Comp Investigation

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A large benefits company has settled with federal agencies that were looking into broker compensation arrangements, officials say.

Unum Group Corp, Chattanooga, Tenn., has entered into an “agreement to cooperate” with the agencies, and to pay $5.5 million in fines and penalties in connection with its own involvement in compensation programs in place from 2000 to 2004, according to officials in the U.S. attorney’s office in San Diego.

The investigating agencies include the Employee Benefits Security Administration, the Federal Bureau of Investigation, the Internal Revenue Service and the Postal Investigations Service.

Prosecutors contend that Unum violated the broker fee disclosure requirements of the Employee Retirement Income Security Act by agreeing to make some payments to a “San Diego insurance broker” without disclosing the fees to benefit plan administrators.

“These special fees were typically denoted as [request for proposal], communication or enrollment fees,” officials say in the announcement of the settlement. “As a result, the insured unknowingly paid higher premiums. In total, the San Diego broker secretly charged the insured millions of dollars in higher premiums based upon the undisclosed special fees.”

The U.S. attorney’s office agreed to settle the matter in part because Unum disclosed what happened in a timely manner, because it helped federal agencies uncover related fraudulent conduct, because it has agreed to strengthen compliance procedures in the future, and because of its “relative lack of culpability when measured against the conduct of the primary involved insurance broker … and other similarly situated insurance carriers underwriting comparable corporate insurance policies,” officials say.

“We’re pleased that we have reached an agreement and that we’ve put this issue behind us,” Unum spokesman Jim Sabourin says.

The “San Diego broker” mentioned in the settlement announcement is Universal Life Resources, Sabourin says.


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