Calif. Commissioner Reaches Settlement with UnumProvident

California Insurance Commissioner John Garamendi has reached a settlement with UnumProvident Corp., Provident Life and Accident Insurance Company, and Unum Life Insurance Company of America to ensure that all compensation UnumProvident pays to brokers will be disclosed to California customers prior to purchase. The settlement marks the first time that an insurer has agreed to make such disclosures in the Employee Benefit Group Coverage area.

“I am pleased that as a result of this lawsuit, a major insurer has agreed to tell its customers the amount and type of compensation it is paying to brokers and agents, and I call on all other insurers to follow suit,” Garamendi said. “As I have said since this department began investigating contingent commissions more than two years ago, brokers, agents and insurers owe their clients truth and honesty in their dealings.”

The Commissioner is hailing the settlement is the latest victory in his continuing investigation and litigation involving secret “contingent commissions” and related steering activities. It follows the earlier permanent injunction and consent decree with Universal Life Resources, which had been a leading broker in the employee benefits area in California but is now out of business.

The Commissioner’s pending case is The People of the State of California by and through John Garamendi v. Universal Life Resources, Case No. GIC838913 (Cal. Super. Ct. San Diego County) continues against defendants Metropolitan Life Insurance Co., Prudential Insurance Company of America, Life Insurance Company of North America, Connecticut General Life Insurance, CIGNA Healthcare of California Inc., CIGNA Dental Health of California Inc., Hartford Financial Services Group Inc., Hartford Life and Accident Insurance Co., and Hartford Life Insurance Co.

Among the notable terms of the settlement:
* At the time a customer requests employee benefits coverage, UnumProvident will provide the customer with the base or standard commissions payable and any other compensation to be paid the broker. UnumProvident will also provide the customer with an estimate of the amount of any contingent compensation expressed as a percentage of premiums paid, if any.

* UnumProvident will provide oversight and training of its employees on compliance with the terms of the settlement and to ensure that the business reforms called for therein are implemented. UnumProvident will also designate appropriate personnel with responsibility to respond to customer inquiries concerning broker compensation issues.

* UnumProvident will continue to fully and promptly cooperate with the Department of Insurance with regard to its ongoing investigations and related proceedings and actions, and will provide an annual verification for a period of three years concerning UnumProvident’s compliance with the settlement agreement.

* UnumProvident will also make publicly available information about its broker compensation practices on its website, including the new disclosure requirements required by the settlement.

* UnumProvident will not enter into any new financial relationships, including equity ownership and/or financing, between (1) UnumProvident and any of its parents or subsidiaries, and/or affiliates, and (2) any brokers. Further, UnumProvident will terminate existing loan relationships with brokers.

* UnumProvident will not sponsor broker production contests or similar award programs which provide for compensation or other remuneration (such as trips, gifts, bonuses) to brokers.

Source: CDI