Archive for the ‘Settlements’ Category

Settlement2There are many questions on the Blog recently concerning private disability settlements because from October through December insurers offer more settlements than at any other time of the year.

In fact, making settlement offers prior to profitability reporting AND holidays is a predetermined and intentional insurance company activity.

Insurance companies make intelligent presumptions and then act upon them. For example, in the past (and while I was a Lead Specialist), Unum taught the claims handlers to be aware of certain, let’s say, characteristics relative to insureds and claimants.

We were instructed to be aware of or identify:

  • Claimants who did not graduate high school and have a third grade reading level.
  • Claimants who through telephone conversations make reference to financial problems and not having enough money.
  • Foreign or non-English speaking claimants.
  • Claimants who appear to be afraid and fearful of losing benefits.
  • Insureds and claimants with more than one child.
  • Claimants that would be more susceptible to the threat of losing benefits.
  • Identify claimants from the “South” because they “are a bit slower.”

Most honest insureds and claimants should be thinking, “Boy, this sounds pretty shady to me”, and of course it is. Conversations at the manager level actually took place at Unum concerning the above and the fact that we (the claims handlers) should offer more settlements to insureds in these categories. (This was at a time when Unum permitted claims specialists to offer settlements and Advance Pay and Close.)

Unum’s rationale behind placing insureds and claimants into categories is that historically these types of people would be more likely to accept low-ball settlement offers because they were either incapable of understanding them, or needed money so badly they would accept nearly any amount offered.

Let me put this into context. A claimant with three children in Atlanta, GA would be offered settlement prior to Thanksgiving because it is possible the family would need money for the holidays.

Another example might be an insured who mentioned financial difficulties frequently to the claims specialist in his letters and phone calls. Finally, another claimant, afraid of losing benefits anyway would be more inclined to accept an Advance Pay and Close when threatened with future work capacity.

This was pretty awful don’t you think? I don’t know whether Unum, or any other insurer is still doing this 15 years later, but it clearly was a pattern of practice and could be still happening to some lesser extent.

In my opinion, no insured or claimant should accept a private disability settlement “because they need money for the holidays”. Insurance companies will presume that certain “profiled” groups would be more inclined to accept offers than others at certain times of the year.

I think the most shady practice is a combination of Unum’s profiling with claimants who think they can outsmart the company. For example, in September, just before the holidays, Unum offers an Advance Pay and Close because Unum expects the claimant to be able to return to work in December.

Unum’s AP&C letters state that if the claimant is unable to return to work in December they will be put back on claim. Hum….says the claimant, I can get get three months of benefits up front and in December I won’t be able to return to work and Unum will put me back on claim.

Think again. After shutting down a substantial financial reserve, how quickly will the company be in reinstating your claim? Unum’s current practice is to state that “its internal medical resources concludes you have work capacity and can return to work.” Therefore, in December the claimant no longer has a claim.

Profiling and group identification does take place in the private disability industry, even if it is just a directive given by one or more claims managers to their direct reports. Settlements offered at this time of the year are lower, and do not benefit insureds and claimants who are persuaded to go along with unfair low-ball offers.

Insureds and claimants should be very careful about “Holiday Handout Settlements”. It’s always best to wait until January when insurers may have a different motive and perspective in offering settlements in the first place.




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Just when I think I’ve heard of about every thing an insurance company can possibly pull, one or more insurers come out the woodwork with another questionable, in this case, settlement   practice.

In a recent phone call an insured described Met Life’s settlement offer that included a 15% “surcharge” for administrative handling and processing of the settlement.

Upon examination, it appeared the insured would be paid 85% of the Net Present Value and according to actual letter would be charged 15% for the so-called “surcharges.” Although Met Life is not generally known as a settlement company, this certainly is the time of year for settlement offers. Still, insurers cannot engage in unfair settlement claims practices at any time.

Met Life is well aware of the fact that when the financial reserve is removed, the company will receive a profitability hit for any amount of settlement paid less than 100% of the reserve. In addition, “settlement lump sums” represent the present value of benefits owed. Reducing the present value by a surcharge in this particular case would cost the insured an additional $15,000 – for administrative costs and processing?

I am almost tempted to say that Met Life is just not saying what it means. Unum, for example offers a percentage of net present value not to exceed 80% of financial reserve. The company gets a profitability hit of at least 20% for each settlement. If Met Life’s intention was to offer 85% of the net present value it should be more direct and say so rather than concocting a “surcharge” of 15% explanation.

As indicated, October through December are “settlement months” for private disability claims. The 15% surcharge should be challenged to find out why it costs $15,000 worth of  benefit due to process a settlement.

In my opinion, a settlement surcharge is an Unfair Claims Settlement Practice.


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Unum’s “Unenlightened Sources”

You have to wonder sometimes when Unum’s reps or resources continually use the wrong words to describe things.

Recently, an insured was contacted by a Unum settlement specialist who continually made mention that he had to find out whether the insured was “insurable or not”. Oops…wrong word…claimant is already insured.

What the rep was no doubt trying to say is, “he needed to find out whether the insured was still eligible for benefits.” It’s pretty scary when an insurance rep doesn’t know the difference.

Using the wrong words has always been one of my “you’ve GOT to be kidding me moments” particularly when insurance reps show their ignorance. If you are covered by an employer ERISA group Plan, you are a Certificate holder, participating in a Plan, and you are a claimant. Your file is referred to as the Administrative Record, and your policy per se is called a Plan.

ERISA entitles you to an appeal and full disclosure of the Administrative Record. Your Plan has a federal jurisdiction and you are not entitled to punitive damages.

Conversely, if you purchased an Individual Disability Income Policy on your own, you are referred to as the insured, you have a policy and a claim file, and are generally NOT entitled to appeals and disclosures although most insurers will give you the chance to submit additional information. Guardian, for example never disclosed it’s claim file outside of litigation.

Your policy has a state jurisdiction and you are entitled to punitive damages as awarded by the court in each state according to statue limitations.

All of the above is a very basic vocabulary that one could assume insurance reps would know. Please note the general public wouldn’t necessarily know the right words to use, but expert insurance companies should, of course, know the difference.

Although some might be tempted to say, “What’s the difference anyway?”, it does seem appropriate that insurance reps who have accountability for paying or denying claims, should know the difference. If they don’t know, I’m happy to politely correct them.




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Once again the issue of Unum lump-sum settlements has been brought to my attention. Where before, Unum always considered requests for settlements, it now appears the company is using settlement requests to engage in claim investigations that could result in termination rather than settlement.

Rumor has it that Unum fired much of its settlement staff and may be outsourcing settlements to a company like Lucens who is now paper chasing SSDI files. In any event, DCS, Inc. was informed some time ago that Unum’s Financial Settlement area was using settlement requests to open up new investigations. Therefore, while Unum’s settlement offer letters still read, “as an option”, it’s clear Unum’s settlement motives are much more sinister.

Today, it is virtually impossible for insureds to invest a lump-sum settlement at the offered discount rate to yield future value. So while Unum profits by at least a 20% financial reserve gain with each settlement, insureds are scrambling to find secure investment opportunities earring greater than 1% interest.

In reality, insureds are unable to realize policy future values and real losses take place. Unum rarely, if ever, offers 100% of NPV (net present value), another realized loss for the insured. Those who are accepting Unum’s offers of settlement are losing a percentage of current value in addition to a percentage of future value.

Whether or not to accept a disability claim settlement is a “life” decision, not only a claim decision. Those who have other sources of income, investments and equity might be able to live on Unum’s offer of settlement; however, those who depend month by month on the lump-sum will never have enough money to maximum duration of claim, or SSR, or normal retirement age.

Yes, there are those insureds who tell me, “Linda, I have to get out from this nasty company. I don’t care if I lose value, I just want out.” This is a very different reason for accepting settlement, but one must be careful not to shoot himself in the foot. The first priority is to put pencil to paper and find out whether the numbers work out for your future support. If not, you have your answer regardless of how disgusted you are with Unum.

Unum isn’t a good prospect for settlement anymore. I actually do a great deal of settlement counseling, and basically the information remains the same.

You may not believe this but sometimes after an accepted settlement people literally “freak out” when the checks stop coming to the bank. It doesn’t make any difference that they have a lump-sum, emotionally, the security of getting a check every month is comforting – without it, frightening. If this is the case, a settlement is not for you.

While I have somewhat supported Unum settlements in the past, I no longer recommend them, if only for economic reasons. Unum needs to get its company act together and become a bit more organized and less chaotic.

Please consider any Unum settlement decision very carefully before signing on that dotted line. In most cases, a Unum settlement isn’t worth it.



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Buy outMost insureds I’ve spoken to in the last several months are looking for Unum settlements to, as they put it, “get out from under Unum’s harassment schemes.”

While this may seem a good idea as you look out through your window at a HUB surveillance vehicle focused on your house, an insurance settlement may not be the right decision your you.

Unum seems to be adhering to several internal criteria limiting claims that potentially could be offered settlements. First, before a lump-sum settlement is made, Unum will want to close the door on any outstanding SSDI issues. This means insureds and claimants need to be awarded SSDI, overpayments repaid, and/or for DI insureds, Supplemental Rider dependent coverage must also be resolved.

Although Unum settlements can offered to “resolve” overpayment issues, it does appear that Unum’s preference is in resolving SSDI before making settlement offers.

High mortality claims are often not offered settlements because Unum may choose to “wait it out” to determine the likelihood of an insured’s survival. Impairments such as heart transplants and cancer could eliminate the possibility of settlement offers, or at best delay offers for a period of time. I know it sounds awful for an insurance company to expect mortality, but when it comes to offering settlements, Unum and other insurers will always take the “self-interest” point of view.

Unum does not generally offer lump sum settlements until the company has exhausted every possible risk activity to deny claims first. Once the company is convinced, however, that it will have liability for the claim to maximum duration, settlement offers can be made.

Currently, insureds should be able to invest the present value settlement at x interest rate (4-4.5 percent) to receive the future value of their policy. Since the American economy is operating in 1% to negative interest rates, there are no safe investments yielding 4.5%.

This means that insureds will never be able to yield 100% of the future value of their claims over time. Money market rates are 1% and below with IRA’s yielding slightly above 2.5%. In addition, Unum will never settle a claim for greater than 80% of the claim’s financial reserve. For this reason, the company will only offer a percentage of the net present value (npv) depending on how close the company is willing to get to the 80% reserve maximum.

However…………America has a new administration in the White House that has promised to repair the economy. In researching this topic and listening to Steve Forbes interviews, it is entirely possible that with the opening of free trade markets and establishment of positive interest rates (higher), insurance settlement discount rates would be lower, higher settlement offers, and future yields much closer to actual values.

Wouldn’t it make more sense for insureds to give the economy a chance to improve before considering lump sum settlements that highly devalue future values of policies? Although we cannot predict for certain how the economy will react to changes in the future, it does make more sense for insureds and claimants not to jump on current settlement offers when economic change could produce more reasonable results.

For all of these reasons DCS recommends caution when considering Unum’s year-end lump-sum settlement offers. Current settlement offers may be considerably below present value with little investment opportunity to earn reasonable interest to yield even close to future values.

Future US economic models could bring higher interest rates to investors in the future making it possible for insureds to receive better investment yields on insurance lump-sum settlements.

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Attorney at Law



I think this article is more about attorneys than UnumProvident. Sometimes settlement just isn’t the way to go.

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Bad dudesI can honestly say that information I’ve been receiving through calls and emails to DCS continues to confirm Unum as a very, very nasty insurance company. So nasty in fact that the company appears to be making claims decisions without any reasonable or substantial proof that EDU insureds and claimants are no longer disabled according to the policy.

Not only does the company target and deny legitimate claims, but it does so openly, deliberately, and without any kind of accountability from state regulators. Unum is the worst disability insurer there is and employers need to take second and third  due diligence look before signing on the dotted line with this company.

Mr. S. emailed DCS to inform me that he had been on Unum claim for nearly 22 years. For the first 10 years of benefits Mr. S. never received any communication or requests for information from Unum, although he did receive phone calls occasionally. Approximately 11 years later (yesterday), Mr. S. received a letter from Unum paying him 6 months of what it called, “extra contractual assistance” and informing him it determined he had work capacity. The claim was closed.

Unum’s strategy here is called an “Advance Pay and Close.” Typically, the company’s Benefit Manual described “conditions” under which an Advance Pay and Close could be used such as: 1) the claimant had to be released to work by treating physicians, 2) an employer had to verify a confirmed date of return to work, and 3) the claimant had to agree to it.

Either Unum’s criteria for AP&C has significantly changed, or the company is not following its own claims procedures manual. Mr. S., of course, confirmed with his physician that he had NOT been released to work in any capacity, and since there was no employer of record confirming a return to work date, Mr. S. became, as he put it, “mad as hell.”

How a claimant who is totally disabled for 21 years suddenly becomes fully able to return to work full-time I don’t know. It’s more likely Mr. S. remains totally disabled than able to work. Also, it’s obvious that Unum had Mr. S’s file reviewed by its own “Med Men” who, in its own opinion, decided in 6 months Mr. S. would have work capacity. How does THAT happen? Work capacity determination is totally up to Unum now?

Another awful thing about Unum’s AP&Cs are that since the strategy is technically not a denial but more like a settlement, no appeal instructions or rights are written into the letter. Claimants are unaware they have the right of appeal and just take the money.

Allow me to point out a few things here as well. First, the reference to “extra contractual assistance” is deliberately intended to communicate the idea that Unum’s payment of six months of benefits is a GOOD thing, and to the benefit of claimants.

“See what Unum is doing for you”, is clearly the message, even though the loss of future benefits may be significant. Unum is also aware that “throwing money at claimants” who are probably behind in their bills and may have significant debt will be accepted regardless of the loss of future benefits.  Does Unum really think you are that foolish?  Of course it does!

Paying claims in the Extended Duration Unit (EDU) for 21 years and then suddenly reversing its position is clearly arbitrary and capricious, and an obvious abuse of discretion. AP&Cs are primarily sent to ERISA Plan participants so to omit a writing of ERISA appeal rights is a violation, in my opinion.

Unum’s management uses the argument that an AP&C is a “mini settlement” not a denial and therefore citation of appeal rights isn’t necessary. BUT, wouldn’t claimants have to agree to a settlement? Unum can’t technically “settle” a claim without claimant buy-in can they? Well, apparently they can.

Unum AP&Cs should be reported to state departments of insurance, the US Department of Labor, and a good ERISA attorney found for the appeal. The bad thing about retaining attorneys is that AP&Cs are offered to the ERISA folks with smaller monthly benefits insufficient to encourage attorney interest. Unum knows that too.

The bottom line is that Unum’s AP&Cs of late do not consider recommendations of treating physicians but are based upon Unum’s misrepresented and “snatched” medical review only. For Mr. S. there was no treating physician buy-in – no return to work release, just Unum’s opinion. The company may be using its computer generated MDA program to arbitrarily decide when a “normal recovery period” is. (By the way, there is no such thing as a normal recovery period.)

There should be documented reasons in the Administrative record validating any claimant has full-time work capacity. In addition, if Unum’s AP&C is considered a settlement, then the buy-out can only take place with the claimant’s approval. You can’t “settle” anything without a meeting of the minds.

Then, there’s the group of Unum claimants (as Unum suspected) who see the $ signs of 6 months of benefits and take the money, forfeiting benefits to age 65. I suspect most of them do not realize they even have the right of appeal, because Unum doesn’t tell them they do. I still speak to claimants who believe everything Unum says and fear denial if they don’t comply.

Remember, Unum likes to use that fear factor and sometimes it’s successful.

AP&C letters should be appealed, the claim file requested (to find out what the AP&C was based on), and the money saved in an interest-bearing account, but unspent. Send a copy of the letter to your state DOI  and regional DOL explaining neither you nor your physician had any say about the allegation of return to work, and that you did not buy-in to settle the claim.

Unum’s AP&C is largely “playing” to your need for cash and the fear you have about accepting Unum’s decisions without a fight. As always, Unum’s tactics hide in plain sight as coming from the “good guys”, but in reality are intended to do harm for the sake of profitability.

In my opinion, attacking the EDU may be an indication of how desperate Unum is to deny more claims and record increased profitability. It’s not reasonable to assert old claimants on claim for 21 years have the ability to return unrestricted to full-time work. It’s my hope that a few judges or state authorities have an opportunity to take a look at this, and slap Unum with more fines.

In my opinion, Unum Group is without a doubt the most unfair and egregious disability company in the United States. Why do employers keep buying this stuff?

I think its pretty obvious Unum never was a “good guy”, and an AP&C doesn’t make them one.

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