Insurance firms reach settlement with US Department of Labor

Insurance firms reach settlement with US Department of Labor

Insurance firms reach settlement with US Department of Labor

The US Department of Labor recently reached settlements with Unum Life Insurance Co. of America and the Lincoln National Life Insurance Co. concerning their handling of evidence of insurability practices.

In the case of Unum, the Labor Department found that the company frequently accepted premiums without verifying whether participants were insurable. This practice misled participants and their beneficiaries into believing they had coverage. When claims were made after a participant’s death, Unum often denied them, citing lack of proof of insurability, thereby depriving beneficiaries of expected life insurance benefits.

The investigation by the Employee Benefits Security Administration (EBSA) also revealed instances where Unum provided coverage to dependents without requiring evidence of insurability, only to deny coverage if the dependent passed away within two years of enrollment and was deemed disabled at the time of enrollment.

Under the terms of the settlement, Unum, headquartered in Portland, Maine, is required to overhaul its administration of proof of good health requirements for participants in employer-sponsored life insurance plans. Additionally, Unum is prohibited from denying benefits solely due to a lack of evidence of insurability under ERISA-governed group life insurance policies after the participant has paid premiums for 90 days or more. The agreement mandates greater transparency regarding changes to coverage effective dates for dependents.

Similarly, Lincoln National Life Insurance Co. was found to have denied life insurance benefits to beneficiaries after accepting premiums without obtaining evidence of insurability. The settlement with Lincoln requires them to revise their evidence of insurability requirement, limiting the timeframe during which evidence can be requested and disregarding any health conditions that arise after the participant’s first premium payment.

EBSA Assistant Secretary Lisa M. Gomez emphasized the importance of insurers verifying eligibility requirements promptly after premium payments are made, underscoring the department’s commitment to ensuring that insurers fulfill their obligations to beneficiaries.

These settlements reflect efforts by the Department of Labor to enforce compliance with regulations governing insurance practices, aiming to protect the rights of consumers and beneficiaries under ERISA.

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