March 21, 2003
Georgia has fined UnumProvident, the nation's largest disability insurer, $1 million and put the company on two years probation after an 18-month investigation into its claims practices.
''They were systematically looking for any possible shred of data or excuse to deny a policy,'' Georgia Insurance Commissioner John Oxendine said. ''They are going to be required to maintain a certain level of fundamental fairness.''
The fine comes as Unum faces investigations in California and Florida and as it appeals two multimillion-dollar jury verdicts in cases that allege Unum wrongly targets policies for cancellation. The company also faces at least 2,500 lawsuits filed by individual policyholders accusing it of fraud and breach of contract.
The Georgia order says Unum must not allow lesser-trained claims processors to overrule decisions made by more highly trained professionals including doctors, must do a better job of telling policyholders of their appeal rights when a claim is denied, and must improve its record keeping.
Unum denies that it has a policy of targeting certain types of claims for cancellation.
Unum says it agreed to the settlement and is working cooperatively with Oxendine's office. In a statement Tuesday, Unum said it expects the changes required by Oxendine will make it a ''more service-oriented company.''
A.M. Best Co. has lowered UnumProvident's debt ratings of UnumProvident and is reviewing the financial strength ratings of of its insurance subsidiaries.
"The lowering of the debt ratings reflects A.M. Best's concerns regarding UnumProvident's ability to raise a significant amount of capital in the approaching weeks on terms which would not be overly onerous to the organization, thus reducing its financial flexibility," A.M. Best said in a statement.
"Besides the need for capital infusion into three of its insurance subsidiaries, A.M. Best is very concerned about the earnings outlook for the entire organization, given UnumProvident's concentrated focus in the disability income market and the continuing deterioration in its core long-term group disability segment," the statement added.
UnumProvident's stock plunged 37 percent earlier this month after Moody's Investors Service said it may lower the company's credit ratings. Moody's cited the insurer's continuing discussions with the Securities and Exchange Commission over how to account for unrealized losses in its junk bond portfolio for the possible downgrade.
The junk-bond losses totaled about $870 million as of Dec. 31.