STATE INSURANCE REGULATORS FINE CONSECO
Multi-state examination finds serious violations
State insurance regulators, working together through the National Association of Insurance Commissioners (NAIC), today announced the details of a regulatory settlement agreement between 40 jurisdictions and Conseco, Inc., due to a pattern of abuses in their long-term care insurance business. This multi-state investigation has resulted in up to $42 million in restitution, sweeping claims-handling improvements and fines.
"Consumers need to have confidence in the insurance products they're buying and in the companies they're doing business with," said Montana State Auditor John Morrison, who chairs the NAIC Market Regulation and Consumer Affairs Committee that oversees multistate examinations. ďAs state insurance regulators, our No. 1 job is to protect consumers by making sure companies pay claims in a prompt and appropriate manner -- and to take action when they fail to do so."
The states of Florida, Illinois, Indiana, Pennsylvania and Texas led the negotiations for the settlement. According to the terms of the settlement, Conseco will pay a $2.3 million penalty to be shared by all participating states; pay a minimum $4 million in restitution and administrative costs to harmed policyholders; will invest $26 million in computer system upgrades, and be prepared to pay an additional $10 million for any further non-compliance related to these matters.
"Conseco is among the nation's largest long-term care insurers," said Pennsylvania Acting Insurance Commissioner Joel Ario. "The truest test of any long-term care product is the prompt and appropriate payment of claims to consumers who are older and whose life and well-being are dependent upon it.
Specifically, exam findings showed that:
- Investigation of pending claims were not handled in a timely manner;
- Claim files were not properly documented or maintained; and
- Time frame for company responses to claimants did not adhere to applicable regulations.
The settlement involves Conseco Senior Health Insurance Company and Bankers Life and Casualty Insurance Company and covers claim files from Jan. 1, 2005, through April 30, 2007. Conseco self-reported serious issues in complaint and claims handling, and blamed the problems on a serious administrative challenge involving the integration of various computer systems. To resolve these problems, the company has contracted with a long-term care claims administrator to process claims in a timely and appropriate manner.
According to the terms of the settlement, Conseco Senior Health Insurance Company, which is not actively writing new policies, will automatically review and readjust 1,112 claims that were initially denied; they will provide notices to another 18,000 policyholders covering 49,000 claims; and will set up a toll-free call center for all claimants who believe their claim settlement was not handled properly.
The department's investigation found that the primary problems in these cases were related to significant delays in claim payments, rather than outright claim denials.
In the case of Bankers Life and Casualty Insurance Company, the investigation uncovered inadequate marketing and sales compliance issues. In this case the settlement requires Bankers to:
- Enhance its producer training program;
- Eliminate and producer transaction thresholds; and
- Review experience period results and refer any appropriate producer for cause termination.
Going forward, both companies will:
- Revise claim handling procedures to insure timely and accurate processing;
- Ensure timely and complete complaint handling;
- Establish a centralized complaint database; and
- Establish a countrywide contact for complaints.
State insurance regulators will conduct ongoing monitoring for appropriate compliance benchmarks as they relate to complaint and claims processing; implement quarterly reporting requirements to the department; and ultimately conduct a re-examination of the companies.
In addition, affected claimants will have the opportunity to have their claims re-evaluated. Conseco has 30 days to mail notices to policyholders on how to seek review of their claims. Those notices will also include a toll-free number for all long-term care claimants.
To date, jurisdictions that have adopted the settlement agreement include: Alabama, Alaska, Arizona, Arkansas, Colorado, Delaware, District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia and Wyoming.
Montanans with questions can contact the Policyholder Services division of the Montana State Auditorís Office at 1-800-332-6148.