Under the agreement, UnumProvident 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, the announcement said. In addition, the company will pay $15.5 million in restitution to policyholders and a civil penalty of $1.9 million.
UnumProvident has also agreed to stop certain practices altogether, such as the making of loans to, or obtaining undisclosed ownership interests in, brokers. “This settlement eliminates incentives for brokers to act against their clients’ interest, and ensures full disclosure of Unum’s compensation arrangements,” Spitzer said in the announcement.
The agreement settles allegations against UnumProvident concerning a variety of undisclosed compensation programs including 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.
Spitzer’s office began an investigation of the company in 2004, spawned by his larger probe into steering and bid rigging in the insurance industry (See Spitzer Expands Focus in Insurance Probe ).
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