Aetna 2014 Annual Report Download - page 47

Annual Report- Page 41
Life and Disability Insurance
Our life and disability insurance operations are subject to extensive regulation. Changes in these regulations, such
as expanding the definition of disability or mandating changes to claim payment, determination and/or settlement
practices, could have a material adverse impact on our life insurance and/or disability insurance operations and/or
operating results. Since 2011, legislation has been enacted or introduced in a number of states requiring life
insurers to take additional steps to identify unreported deceased policy holders, and make other changes to their
claim payment and related escheat practices, including consultation of certain databases. A significant number of
states are investigating life insurers’ claims payment and related escheat practices, and these investigations have
resulted in significant charges to earnings by other life insurers in connection with related settlement agreements.
We have received requests for information from a number of states, and certain of our subsidiaries are being
audited, with respect to our life insurance claim payment and related escheat practices. In the fourth quarter of
2013, we made changes to our life insurance claim payment practices (including related escheatment practices)
based on evolving industry practices and regulatory expectations and interpretations, including expanding our
existing use of the Social Security Administration’s Death Master File to identify additional potentially unclaimed
death benefits and locate applicable beneficiaries. As a result of these changes, in the fourth quarter of 2013, we
increased our estimated liability for unpaid life insurance claims with respect to insureds who passed away on or
before December 31, 2013, and recorded in current and future benefits a charge of $35.7 million ($55.0 million
pretax). Given the legal and regulatory uncertainty with respect to life insurance claim payment and related escheat
practices, it is reasonably possible that we may incur additional liability related to those practices, whether as a
result of further changes in our business practices, litigation, government actions or otherwise, which could
adversely affect our operating results and cash flows.
Consumer Protection Laws
The consumer business we are creating and certain of our other businesses participate in direct-to-consumer
activities, and we increasingly offer mobile and web-based solutions to our members and to other consumers. We
are therefore subject to federal and state regulations applicable to electronic communications and to other general
consumer protection laws and regulations. In particular, the FTC is aggressively exercising its enforcement
authority in the areas of consumer privacy and data security with a focus on web-based, mobile products and “big
data.” As a result of the widely-reported large scale U.S. commercial data breaches during 2014 and early 2015, the
FTC and state regulators are expected to increase their enforcement activity in these regimes. These enforcement
developments will impact the design, management and operation of our businesses, including the consumer
business we are creating, our privacy and security strategy and our web-based and mobile assets.
International Regulation
We expect to continue to expand our Health Care operations in foreign countries through both organic growth and
acquisitions. We currently have insurance licenses in several foreign jurisdictions and do business directly or
through local affiliations in numerous countries around the world. These international operations are subject to
different, and sometimes more stringent, legal and regulatory requirements, which vary widely by jurisdiction,
including anti-corruption laws; economic sanctions laws; various privacy, insurance, tax, tariff and trade laws and
regulations; corporate governance, privacy, data protection, data mining, data transfer, labor and employment,
intellectual property, consumer protection and investment laws and regulations; discriminatory licensing
procedures; compulsory cessions of reinsurance; required localization of records and funds; higher premium and
income taxes; and requirements for local participation in an insurer’s ownership. In addition, the expansion of our
operations into foreign countries increases our exposure to the anti-bribery, anti-corruption and anti-money
laundering provisions of U.S. law, including the FCPA, and foreign laws, including the U.K. Bribery Act 2010 (the
“UK Bribery Act”).
The FCPA prohibits offering, promising or authorizing others to give anything of value to a foreign government
official to obtain or retain business or otherwise secure a business advantage. We also are subject to applicable anti-
corruption laws of the jurisdictions in which we operate. In many countries outside the U.S., health care
professionals are employed by the government. Therefore, our dealings with them are subject to regulation under
the FCPA. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions
as well as other penalties, and the SEC and the DOJ have increased their enforcement activities with respect to the