Unum 2006 Annual Report Download - page 31

13
Regulation
General
Our U.S. insurance subsidiaries are subject to comprehensive regulation and oversight by insurance departments in
jurisdictions in which they do business and by the U.S. Department of Labor on a national basis, primarily for the
protection of policyholders. Unum Limited is subject to regulation by the Financial Services Authority (FSA) in the
U.K. The state insurance departments in the United States and the FSA in the U.K. have broad administrative
powers with respect to all aspects of the insurance business and, in particular, monitor the manner in which an
insurance company offers, sells, and administers its products. This monitoring may include reviewing sales
practices, including the content and use of advertising materials and the licensing and appointing of agents and
brokers, as well as underwriting, claims, and customer service practices. The U.S. Department of Labor (DOL)
enforces a comprehensive federal statute which regulates claims paying fiduciary responsibilities and reporting and
disclosure requirements for most employee benefit plans. Our domestic insurance subsidiaries must meet the
standards and tests for investments imposed by state insurance laws and regulations of the jurisdictions in which
they are domiciled. Domestic insurance subsidiaries operate under insurance laws which require they establish and
carry, as liabilities, statutory reserves to meet policyholder obligations. These reserves are verified periodically by
various regulators. Our domestic insurance subsidiaries are examined periodically by examiners from their states of
domicile and by other states in which they are licensed to conduct business. The domestic examinations have
traditionally emphasized financial matters from the perspective of protection of policyholders, but they can and have
covered other subjects that an examining state may be interested in reviewing, such as market conduct issues. Other
states more typically perform market conduct examinations that include a review of a company’s sales practices,
including advertising and licensing of agents and brokers, as well as underwriting, claims, and customer service
practices to determine compliance with state laws.
Examinations and Investigations
Claim Related
In the fourth quarter of 2004, certain of our insurance subsidiaries entered into settlement agreements with state
insurance regulators upon conclusion of a multistate market conduct examination led by Maine, Massachusetts, and
Tennessee relating to our disability claims handling practices. A total of 48 states and the District of Columbia were
parties to the settlement agreements, which provide for changes in certain claims handling procedures, a claim
reassessment process available to certain claimants whose claims were denied or closed during certain periods and
who choose to participate, changes in governance to increase oversight of the claims handling and reassessment
process, and contingent fines for non-compliance. In addition, the DOL, which had been conducting an inquiry
relating to certain Employee Retirement Income Security Act (ERISA) plans, was a party to the settlement
agreements, and the Office of the New York Attorney General (NYAG), which had engaged in its own investigation
of our claims handling practices, notified us that it was in support of the settlement and was, therefore, closing its
investigation on this issue.
In October 2005, certain of our insurance subsidiaries entered into a settlement agreement with the California
Department of Insurance (DOI), concluding a market conduct examination and investigation of the subsidiaries’
disability claims handling practices. The California DOI had chosen not to join the 2004 multistate settlement
agreements. As part of the settlement with the California DOI, we agreed to change certain practices and policy
provisions related to our California business. The settlement also incorporates claims handling practices previously
covered by the multistate settlement agreements and includes certain additional claims handling changes. Under the
terms of the settlement, we changed certain provisions specific to California disability policies, and we received
approval from the California DOI for the use of new individual and group disability policy forms. Following the
California settlement, we also amended the multistate settlement agreements to include mailing a notice of eligibility
to participate in the claim reassessment process to approximately 29,500 individuals whose claims were denied or
terminated between January 1, 1997 and December 31, 1999. Under the original multistate settlement agreements,
claimants during this period could request participation in the reassessment process, but they were not sent a notice.
Separately, we are proceeding with a plan to offer to reassess private label, acquired, and reinsured block claims, as
well as claims administered on behalf of certain employers.