UnumProviden Corp. has agreed to reassess more than 200,000 disability claims it originally denied since 1997 and change how it handles future claims to settle a multi-state investigation led by insurance regulators from Tennessee, Maine and Massachusetts.
The settlement, which includes a $15 million fine, stems from concerns that three UnumProvident subsidiaries unfairly evaluated the medical conditions of people making a disability claim and relied too heavily on in-house medical staff to deny, terminate or reduce insurance benefits.
The probe, which was joined by all 50 states and the District of Columbia, also found that UnumProvident failed to evaluate the ”totality” of a claimant’s medical condition and placed an ”inappropriate burden” on them to justify their eligibility to collect benefits.
Chattanooga-based Unum-Provident is the largest provider of group and individual disability insurance in North America, providing coverage to more than 25 million people. The subsidiaries involved in the settlement are Unum Life Insurance Company of America, The Paul Revere Life Insurance Company and Provident Life and Accident Insurance Company.
Under terms of the settlement, UnumProvident will send written offers to reassess an estimated 215,000 disability claims denied or terminated nationwide since Jan. 1, 2000. The company also will reassess upon request any claims similarly handled between 1997 through 1999.
UnumProvident also agreed to enhance its claims handling procedures and implement new corporate governance measures to provide additional oversight of those operations. The company said it anticipates recording a $127 million loss to implement the changes, pay the fine and set aside reserves for claims that are reassessed.
Questions about UnumProvident’s handling of claims have been raised in hundreds of private lawsuits filed by policyholders who allege their benefits were unfairly denied or terminated. UnumProvident has denied any wrongdoing in those cases and noted yesterday that the states’ examination did not find that the company violated any laws or regulations.
”UnumProvident is committed to handling customers’ claims in a fair, thorough and objective manner,” UnumProvident President and Chief Executive Officer Thomas Watjen said in a statement. ”We have committed significant resources over a number of years to build a sound claims process.”
UnumProvident said it paid $4.1 billion in disability claims in 2003, more than double any other insurer.
Tennessee Commissioner of Commerce and Insurance Paula Flowers said she did not believe UnumProvident intentionally sought to unfairly deny customers’ disability claims, an area of insurance she said is difficult to operate within.
”This is a complex process for these claims to be reviewed compared to something like auto insurance,” Flowers said. ”In this instance, a claimant over a period of time may submit boxes and boxes of medical information. It’s very labor-intensive.”
Complex or not, Flowers said, UnumProvident’s way of handling claims was flawed.
”The concerns we saw were at a level we felt the system may not have treated claimants fairly,” Flowers said.
Flowers could not provide an estimate of how many Tennesseans might be eligible to have their claims reassessed.
Customers can also opt to pursue their own cases via the courts.
Tennessee, Maine and Massachusetts had lead roles in the multi-state case because the Provident, Unum and Paul Revere are domiciled in those states, respectively. Tennessee launched a so-called market conduct examination of UnumProvident in late 2002. All 50 states and the District of Columbia eventually joined the probe and can participate in the settlement.
The settlement is contingent on participation from two-thirds of the states. Flowers said Tennessee’s share of the $15 million fine is likely to be about $600,000.