Bankers Life’s Parent To Settle Multistate Probe

May 8--Conseco Inc., parent of Bankers Life and Casualty, will pay at least $32.3 million in a 40-state settlement because subsidiaries improperly denied and delayed claims, misled consumers and sold annuities that weren't suitable for some senior citizens, regulators said Wednesday.

The settlement includes Connecticut, where the state's Insurance Department has received dozens of complaints about Bankers Life sales and marketing practices for such products as annuities and life insurance. Separately from the multistate probe, the department has been investigating several Bankers Life agents.

The settlement of the states' "market conduct examination," which involves Conseco Senior Health as well as Bankers Life, requires Conseco Inc. to pay a $2.3 million fine. The fine will be shared by the 40 states, and the company would have to pay an additional $10 million in fines if problems aren't corrected.

The company must pay at least $4 million of restitution to customers, and will also invest $26 million in system upgrades and improved claims handling.

The investigation found "a pattern of consumer harm" by the company in long-term care insurance, which pays for nursing home, and often, home care.

Under the settlement, Conseco Senior Health will automatically review 1,112 claims that were initially denied. The company will also send notices to another 18,000 policyholders nationwide regarding 49,000 claims that may have been partly denied or denied after an initial payment so consumers can request that those claims be reviewed.

"It is vital that long-term care insurers make prompt and appropriate payment of claims to consumers who are older and whose lives and well-being are dependent upon it," said Joel Ario, acting insurance commissioner in Pennsylvania, which led the investigation. "Conseco failed this test."

The settlement requires the company to contract with an experienced long-term care claims administrator to make sure claim payments are proper and timely. The investigation found that Bankers Life sold products to senior citizens "that were not necessarily in consumers' best interests," provided misleading information about such products as annuities, and failed to adequately supervise its sales staff, said Rosanne Placey, press secretary at the Pennsylvania Insurance Department.

The accord requires Bankers Life to enhance training of its sales force and change the threshold for disciplinary action so action can be taken against an agent even on a single complaint. The company must supervise all sales representatives and terminate them if they don't comply with marketing standards.

Bankers Life and Conseco Senior Health are also required to handle complaints completely and in a timely way and create a centralized complaint database.

Conseco reported serious issues in complaint and claims handling and blamed problems on "the challenge of integrating various computer systems," Pennsylvania's department said.

"Conseco is committed to meeting standards set forth in the forward-looking settlement to steadily improve our company," Conseco Chief Executive Jim Prieur said in a written statement. "We've been diligently working toward best-in-class service through the process improvement and enhancement program we implemented in 2007, and are already seeing meaningful results in claims and complaint handling."

Prieur said the examiners "did not find that Conseco engaged in a practice of improper claim denials." Pennsylvania regulators say the problem in most cases was delay of claim payments rather than outright denials, and that some claims were paid that shouldn't have been paid.

The $2.3 million fine may seem small to some consumers, but Placey said, "We thought it was very important to focus significant dollars [instead] on improving complaint and claims handling systems at the company so that this won't be happening again."

Conseco could wind up paying more than $4 million in restitution on claims if that's what it takes, Placey noted. The settlement covers claims filed from Jan. 1, 2005, through April 30, 2007.

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