Unum: Earnings Up, Claim Payouts Down. Surprised?

Portland, MNWhile the business side of Unum seems to be doing fine, thank you—the ethical side is still taking a hit, with at least one interviewee on BBC back in November suggesting that despite assurances to the contrary, the leopard has yet to change its spots.

The world's largest disability insurer, with 25 million Unum life insurance policies in the US alone, was taken to task a few years ago by various agencies and state governments for unethical practices with regard to claims handling, and was ordered to re-open hundreds of thousands of previously-closed claims.

Little wonder, when you hear the kind of story told by Linda Nee, who was featured as part of a BBC broadcast on the evening of November 7th of last year. Nee was a claims handler for Unum Provident.

"I was often placed in a position by a consultant who was my supervisor, of denying a claim, of telling me to deny a claim, of having a manager tell me to remove documentation from a claim so that an attorney would not have an opportunity to see it."

It has been alleged that Unum Provident had cheated tens of thousands of disabled Americans out of their rightful benefit claims. Many of those claims, observed the BBC in the televised report, came from California—which prompted the state insurance commissioner at the time to issue harsh words against the company.

Under an agreement signed by all fifty States, Unum Provident was fined $23 million and ordered to re-open 300,000. The cost to the insurer was a half billion dollars.

Since that time Unum Provident became Unum, and new leadership and a renewed commitment to the policyholder appeared to usher in a new era at Unum.

However, that appears not to be the case, according to the BBC report, which alleges dozens of bad-faith cases on both sides of the Atlantic are still at play.

Laura is one such disgruntled Unum client who had to abandon her successful business after being diagnosed with MS. Unum paid her long-term disability benefits (LTD) for two years, before abruptly cutting her payments. In the televised report, an obviously subdued and exasperated woman uses words like unethical, immoral, and cruel, when describing her insurer—they, "...knowing full well that most people who have been deceived like this will have absolutely no money or form of legal recourse."

Laura had no other recourse of her own, but to sell her home.

Meanwhile, with 300,000 people across Scotland receiving incapacity benefits, the government is pursuing reforms in an effort to try to reduce their social benefit costs.

Not surprisingly, Unum has been equally interested in such cost reduction and has been working closely with the government in this regard, with senior executives sitting on key government working groups last year, advising the UK government and providing memoranda towards welfare reforms. As well, Unum was also awarded grants worth 300,000 pounds to Unum's research center, says the BBC, located in Cardiff.

There are those who feel Unum's conduct in the US could very well bleed into the UK.

Meantime, while Unum reported lower quarterly income in the fourth quarter of 2007, operating earnings were up and exceeded expectations.

What's more, the company reports no sub-prime exposure.

And, the relationship of claims paid vs. premiums earned was lower by about four per cent. In other words, funds paid out in claims have dropped four percentage points against premiums, which translates to higher profits.

Thus, all appears well for Unum, if not for some of its clients.