Market Conduct Examination Finds Serious Violations in Long-Term Care Insurance Market
HARRISBURG, Pa., May 7 /PRNewswire-USNewswire/ -- Acting Insurance Commissioner Joel Ario today announced a 40-state settlement with Conseco Inc., which was necessary due to a pattern of consumer harm in the company's long-term care insurance business.
The Pennsylvania Insurance Department led the multi-state investigation, which resulted in a $2.3 million fine and an additional $30 million in claims-handling improvements and restitution.
"Conseco is among the nation's largest long-term care insurers," said Ario. "It is vital that long-term care insurers make prompt and appropriate payment of claims to consumers who are older and whose lives and well-being are dependent upon it. Conseco failed this test.
"The company will pay $32 million, primarily for claims-handling improvements and restitution to consumers who were harmed. Affected policyholders will have the opportunity to have their claims re-evaluated."
The on-site examination showed that:
-- Investigation of pending claims were not handled in a timely manner;
-- Claim files were not properly documented or maintained; and
-- Time frames for company responses to claimants did not adhere to
The settlement involves two Conseco subsidiaries -- Conseco Senior Health Insurance Company and Bankers Life and Casualty Insurance Company -- and covers claims filed from Jan. 1, 2005, through April 30, 2007.
Conseco self-reported serious issues in complaint and claims handling and blamed the problems on the challenge of integrating various computer systems. The settlement requires the company to contract with an experienced 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 1,112 claims that were initially denied; it will provide notices to another 18,000 policyholders covering 49,000 claims that may have been partially denied or subsequently denied after initial payment; 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 most cases were delays in claim payments rather than outright claim denials.
In the case of Bankers Life and Casualty Insurance Company, which is
writing new policies, the investigation uncovered inadequate marketing and
sales compliance issues. The settlement requires Bankers to:
-- Enhance its producer (agent) training program;
-- Eliminate producer complaint thresholds so that a single complaint can
result in disciplinary action;
-- Regularly review experience-period results for all producers; and
-- Supervise all producers and terminate them due to non-compliance with
Going forward, both companies are required to:
-- Revise claims-handling procedures to guarantee timely and accurate
-- Handle all complaints completely and in a timely fashion;
-- Create a centralized complaint data base; and
-- Establish a countrywide contact for complaints.
Regulators will conduct ongoing monitoring for appropriate compliance benchmarks for complaint and claims processing; implement quarterly reporting requirements to the department; and, ultimately, conduct a re-examination of the companies to ensure that all problems have been corrected.
This multi-state examination was coordinated with the National Association of Insurance Commissioners' (NAIC) market analysis working group and was conducted on behalf of more than 40 participating states under the leadership of Pennsylvania with the active involvement of Florida, Illinois, Indiana and Texas.
According to the terms of the settlement, Conseco will pay a $2.3 million penalty that will be shared by all participating states; pay at least $4 million in restitution and administrative costs to harmed policyholders; and invest $26 million in system upgrades and improved claims administration. Conseco is also obligated to pay an additional $10 million in fines if problems are not corrected.
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. The full examination report is available via http://www.insurance.state.pa.us. Conseco's toll-free number for long-term care claim inquiries will be posted there as soon as it becomes available.
In the meantime, consumers with questions may contact the Pennsylvania Insurance Department's automated consumer hotline at 1-877-881-6388 or call any of the department's Bureau of Consumer Services' regional offices: Harrisburg - (717) 787-2317; Philadelphia - (215) 560-2630; or Pittsburgh - (412) 565-5020.
Rosanne Placey or Melissa Fox
|SOURCE Pennsylvania Department of Insurance|
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