DCBS Media Release

November 18, 2004
For More Information:
John Piper, 503-947-7213

Oregon expects to join multi-state, federal settlement on UnumProvident claims handling

SALEM – Oregonians are expected to benefit from a settlement announced today by the chief insurance regulators of Maine, Massachusetts, and Tennessee, who released their examination of the claims handling practices of three disability insurers owned by UnumProvident Corp., along with agreements requiring the companies to change their claims practices and to re-assess certain claims going back as far as 1997.

Oregon, along with 46 other states and the District of Columbia, joined the three ``lead states'' in the multi-state market conduct examination of Unum Life Insurance Co. of America, The Paul Revere Life Insurance Co., and Provident Life and Accident Insurance Co. The U.S. Department of Labor, which conducted a related investigation of UnumProvident's practices involving employee benefit plans covered by the Employee Retirement Income Security Act, is also a party to the settlement agreements. New York's Attorney General, who also investigated the companies' claims practices, has endorsed the settlement.

All 50 states and the District of Columbia will have the opportunity to join in the identical settlement agreements signed today by Maine Insurance Superintendent Alessandro Iuppa, Massachusetts Insurance Commissioner Julianne Bowler, Tennessee Insurance Commissioner Paula Flowers, and U.S. Department of Labor Employee Benefits Security Administration Regional Director James Benages. A substantially identical agreement was signed by Gregory Serio, New York Superintendent of Insurance, with UnumProvident's New York company. All four agreements become effective once two-thirds of the participating states have approved.

The settlement agreements, which are substantially similar, require the companies to:

• offer, in writing, to reassess claims denied or closed since January 1, 2000 for reasons other than settlement, death, or reaching benefit maximums (about 215,000 claimants are in this population);
• allow for reassessment, upon request, of claims similarly denied or closed between January 1, 1997 and December 31, 1999;
• modify claims handling and benefit determination practices as specified by the agreements;
• improve accountability and oversight of claims processes as specified in the agreements; and
• enhance corporate governance by expanding the Board of Directors by three directors with insurance industry or regulatory experience.

`This action will provide important benefits and protections to Oregon consumers," said Oregon Insurance Administrator Joel Ario.

The Oregon Insurance Division received the settlement language earlier today and expects to join the settlement after reviewing the final documents.

The settlement will affect an estimated 2,047 Oregon policyholders. In addition, Oregon will receive $106,000 of the $15 million fine assessed against UnumProvident.

Oregon policyholders who believe their disability claim, going back to January 1, 1997, has been mishandled by UnumProvident should contact the Insurance Division at 1-888-877-4894 or 503-947-7984. Information about the settlement also will be available on the division's Web site: insurance.oregon.gov.

The $15 million fine is being divided on a pro-rata basis among the participating states based on the long term disability income insurance premium in each state as of December 31, 2003. If the companies fail to meet the terms of the Plan of Corrective Action set forth in the agreements, a substantial fine ($145 million) will be imposed.

The multistate market conduct examination identified several claims handling practices of concern to the state insurance regulators, including:

• excessive reliance on in-house medical staff to support the denial, termination, or reduction of benefits;
• unfair evaluation and interpretation of attending physician or independent medical examiner reports;
• failure to evaluate the totality of the claimant's medical condition; and
• an inappropriate burden placed on claimants to justify eligibility for benefits.

"The agreements make sure that policyholders and claimants, past and present, get what they paid for," Ario said.

The agreements also require significant changes in UnumProvident's claim handling processes, and the states will continuously monitor and assess the companies' compliance with the agreements.

The cost of the examination, the continued oversight called for in the settlements, and compliance with the settlements is estimated to be more than $120 million.

The multi-state exam began in September 2003, after Massachusetts and Tennessee had begun market conduct examinations of their respective domiciled companies. In consultation with their colleagues nationwide through the National Association of Insurance Commissioners (NAIC) all the states and the District of Columbia joined in the multi-state examination.

The complete Examination Report, the settlement agreements and exhibits can be found online at www.maineinsurancereg.org; www.state.ma.us/doi (look at "What's New"); or www.state.tn.us/commerce.