Nation's Largest Disability Insurer
Attorney General Spitzer today announced an agreement with the nation's largest disability insurer to resolve an investigation of deceptive practices in its compensation of brokers and consultants in connection with the sale of group insurance products.
Under the agreement, the UnumProvident Corporation (Unum) will become the first life and disability carrier to agree not to pay contingent commissions on all group insurance products and to provide full disclosure of broker compensation to employers and other organizations that purchase its products on behalf of their employees or members.
"This settlement eliminates incentives for brokers to act against their clients' interest, and ensures full disclosure of Unum's compensation arrangements," Spitzer said. "These reforms, many of which were conceived by Unum itself, will help restore the integrity of the market and promote competition."
Spitzer's office began an investigation of Unum in 2004. The probe was an outgrowth of the Attorney General's ongoing investigation of steering and bid rigging in the insurance industry.
Today's agreement sets forth allegations concerning a variety of undisclosed compensation programs previously employed by Unum. These programs included payments made to brokers based on their ability to persuade clients to renew policies in the face of rate increases, and loans made by Unum to brokers that could be "earned off" if Unum obtained a sufficient amount of business from the brokers' clients.
In addition to measures that will increase the transparency of broker compensation to consumers, Unum has also agreed to stop certain practices altogether, such as the making of loans to, or obtaining undisclosed ownership interests in, brokers. It is anticipated that the agreement could serve as a model for carriers and other participants in the employee benefits insurance industry.
Unum, based in Chattanooga, Tenn., will pay $15.5 million in restitution to policyholders and a civil penalty of $1.9 million.
The investigation underlying today's agreement was led by Deputy Attorney General Kermitt Brooks, with Public Advocacy Division Special Counsel David Weinstein, and Assistant Attorneys General John Carroll and Gaurav Vasisht of the Investment Protection Bureau.
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