Disability insurer settles state suit

SACRAMENTO — The nation’s largest disability insurer, UnumProvident Corp., has settled a lawsuit filed by state regulators and has agreed to give prospective policyholders more information about commissions paid to brokers.

The agreement with California Insurance Commissioner John Garamendi ends an effort that began in 2004 to curtail the alleged steering of business by brokers to insurers who paid higher commissions.

“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,” Garamendi said.

He filed the UnumProvident lawsuit a year ago as part of an action against four insurers, alleging that they steered kickbacks to San Diego-based broker Universal Life Resources Inc., which placed group life and disability insurance business with a number of large employers.

The action, which paralleled a class-action lawsuit by private attorneys, was part of a coordinated enforcement campaign with New York Atty. Gen. Eliot Spitzer.

On Wednesday, Spitzer announced that he had reached his own $17.4-million settlement with Chattanooga, Tenn.-based UnumProvident. The agreement includes $15.5 million in restitution to policyholders and a $1.9-million civil penalty.

The settlement contains no restitution or penalties. Instead, it requires the company from now on to provide customers with details of broker compensation and estimates of how the commissions affect premium prices.

UnumProvident said in a statement that it hoped the California and New York agreements “can be a model for our industry.”

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