In the first lawsuit, New York Attorney General Eliot Spitzer announced on November 1 that the UnumProvident will stop contingent commission payments, disclose insurance-broker compensation and pay a settlement of $17.4 million.
Of that $17.4 million, $15.5 million will go to restitution for policy holders and $1.9 million will pay for a civil penalty.
The agreement makes UnumProvident the first disability carrier to stop paying contingent commissions on all group insurance products.
Contingent commissions are offered by insurance companies to brokers who push clients to their companies but the result is that clients may not get the best prices for their insurance. UnumProvident paid commissions to brokers who renewed policies despite rate increases.
A similar lawsuit, filed by state insurance regulators last year, was also settled in California this month. UnumProvident Corp agreed to give prospective policy holders more information about broker commissions.
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Among the terms of the California settlement:
- When a customer requests employee benefits coverage, that customer will be provided with information concerning standards payable and other compensation for the broker.
- UnumProvident will sever all existing loan relationships with brokers and will not enter into new financial relationships with insurance brokers.
- UnumProvident is no longer able to sponsor broker production awards programs which provide compensation to brokers for selling UnumProvident insurance.