Conseco, Inc., failed the test of prompt claims payment, and for that the insurer will pay.
Working through the National Association of Insurance Commissioners (NAIC), insurance regulators from 39 states reached a regulatory settlement agreement between their states, the District of Columbia, and Conseco, Inc., that culminated an investigation caused by a pattern of consumer harm in the company’s long-term care insurance business.
“Conseco is among the nation’s largest long-term care insurers,” said Joel Ario, Acting Insurance Commissioner of Pennsylvania, whose department served as the lead state on the investigation. “It is vital that long-term care insurers make prompt and appropriate payment of claims to consumers who are older and whose life and well-being are dependent upon it. Conseco failed this test.”
In addition to Pennsylvania, the states of Florida, Illinois, Indiana, and Texas led the settlement negotiations. The settlement dictates that Conseco must pay a $2.3 million penalty, to 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 $10 million more in fines if problems are not corrected.
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.
- Time frames for company responses to claimants did not adhere to applicable regulations.
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.
The settlement involves two Conseco subsidiaries—Conseco Senior Health Insurance Company and Bankers Life and Casualty Insurance Company—and covers claims filed from January 1, 2005, through April 30, 2007.
Conseco Senior Health Insurance Company, which is not actively writing new policies, is required to review 1,112 claims that were initially denied. It must provide notices to another 18,000 policyholders covering 49,000 claims that may have been partially denied or subsequently denied after initial payment. Finally, it must set up a toll-free call center for all claimants who believe their claim settlement was not handled properly. The investigation found that the primary problems in most cases were delays in claim payments, rather than outright claim denials.
The investigation uncovered inadequate marketing and sales compliance issues concerning Bankers Life and Casualty Insurance Company, which is writing new policies. 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 marketing standards.
Both companies are required to: - Revise claims-handling procedures to guarantee timely and accurate processing.
- Handle all complaints completely and in a timely fashion.
- Create a centralized complaint database.
- Establish a countrywide contact for complaints.
State insurance regulators will conduct ongoing monitoring for appropriate compliance benchmarks for complaint and claims processing; implement quarterly reporting requirements; and eventually re-examine the companies to ensure that all problems have been corrected.
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