By BILL POOVEY, Associated Press WriterCHATTANOOGA, Tenn. – UnumProvident Corp., the nation’s largest disability insurer, will pay a $15 million fine and reconsider about 200,000 denied claims in response to a multistate investigation, company executives said Thursday.
The company estimates the settlement will cost it $127 million in restitution to policy holders and in enacting required reforms.
Insurance regulators in Tennessee, Maine and Massachusetts, the lead states in the investigation, signed the agreement, as did officials in New York and the U.S. Department of Labor, spokeswoman Mary Clarke Guenther said.
In trading Thursday on the New York Stock Exchange (news – web sites), UnumProvident shares fell 36 cents to close at $13.73. They soared nearly 7.5 percent, or $1.02, in late trading after the settlement was announced.
The company insures more than 25 million people and has about a quarter of the disability insurance market.
Paula Flowers, commissioner of the Tennessee Department of Commerce and Insurance, said that while problems were noted in a very small percentage of claims there were enough that “corrective action was warranted.”
Guenther said insurance regulators in states that sign the agreement would get a share of the fine. She said individual customers would not be affected by whether their states agree.
Final approval of the settlement depends on regulators in two-thirds of the 47 remaining states agreeing. Officials in some states plan to continue their own market conduct examinations.
The investigation started last year in response to customer complaints. Georgia’s insurance commissioner, John Oxendine, in March 2003 imposed a $1 million fine on UnumProvident and its subsidiaries, saying his investigation showed a mind-set of looking “for every technical legal way to avoid paying a claim.”
Flowers said the investigation raised “concerns” that included the company relying “solely on their in-house physicians” to decide whether to deny or terminate some medically disputed claims, basing denials on “very narrow interpretations” and failing to consider both physical and psychological conditions in some cases.
She said the agreement calls for “at least 200,000″ denied claims to be re-examined under the continuing scrutiny of regulators. She said regulators would again examine the company’s claims handling after two years.
If the company does not meet the settlement requirements after two years, there is a possible “contingent fine’” of up to $145 million.
UnumProvident executives previously said disputes represent a small fraction of the roughly 400,000 disability claims the company processes annually.
Guenther said an additional 75 employees would be hired as part of the settlement.
UnumProvident, formed with the 1999 merger of Provident Cos. of Chattanooga and Unum Corp. of Portland, Maine, has more than 13,000 employees worldwide.