5. Conseco

5. Conseco

CEO: C. James Prieur
2007 compensation $2.6 million
HQ: Indianapolis, IN
Profits: $179.9 million (2007)
Assets: $33.5 billion (88)

Conseco sells long-term care policies, typically to the elderly. Unfortunately, Conseco uses deteriorating health of its policyholders to its advantage because the company knows if it waits long enough to pay out claims, its customers will die.
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Conseco’s customers are some of the most vulnerable members of the population. The company sells long-term care policies, typically to the elderly, as insurance that the policyholder will be taken care of at the end of his or her life. Unfortunately, Conseco uses the imminent deaths of its policyholders to its advantage by delaying or denying valid claims of those who no longer care or advocate for themselves. Mary Beth Senkewicz, a former senior executive at the National Association of Insurance Commissioners (NAIC), summed up the tactics of the long-term care insurance industry quite succinctly: “The bottom line is that insurance companies make money when they don’t pay claims…They’ll do anything to avoid paying, because if they wait long enough, they know the policyholders will die.”

Long-term care insurance policies are usually purchased by senior citizens as assurance that they will be able to afford to live in an assisted living center or nursing home when they are no longer capable of living on their own. Conseco and its subsidiaries, Bankers Life and Casualty and Penn Treaty American, sell such policies. However, many policyholders have not been satisfied with the way their claims have been handled. Conseco, Bankers, and Penn Life have had numerous complaints filed with state regulators over long-term care insurance, particularly in regard to claims handling, price increases, and advertising methods.

Despite all their efforts to retain money by refusing to pay valid claims, Conseco has fallen on hard times financially, Throughout the 1990s, Conseco and its affiliates aggressively undercut their competitors and expanded their market share in the long-term care insurance market. Around the time company founder Stephen Hilbert left in 2000, the market tightened and executives realized they had been underestimating how long policyholders would live once they entered nursing home. In 2002, the company fell $6.5 billion in debt and was forced into Chapter 11 bankruptcy. Conseco sued Hilbert for more then $250 million over company-backed loans and debt. In 2004, a court ordered Hilbert to return $62.7 million plus interest to Conseco and allowed the company to foreclose upon his 25,000 square-foot mansion in Indiana. Hilbert and Conseco agreed to a confidential settlement in 2007 that allowed the former CEO to keep his house. Two other Conseco executives faced civil and criminal charges for their roles in an accounting fraud scheme that overstated the company’s earnings by hundreds of millions of dollars. Former CEO Rollins S. Dick and former chief accounting officer James S. Adams admitted to filling misleading financial statements with regulators between March 1999 and April 2000. In 2006, an Indiana court ordered that Dick and Adams be prohibited from serving as a director or officer of a public company for five years and ordered them to pay civil penalties of $110,000 and $90,000, respectively.

Former employees of Conseco and its subsidiaries have spoken out about the company’s claims-handling practices. Former Bankers Life agent Betty Hobel said Conseco and Bankers Life “made it so hard to make a claim that people either died or gave up.” Another former Bankers Life employee, Robert Ragle said “[t] heir mentality is to keep every dollar they can.” In a 2006 deposition, Bankers Life claims adjuster Teresa Carbonel described how she was forbidden from calling physicians or nursing homes to request missing paperwork before denying claims. Another Conseco employee, Jose Torres, testified in separate deposition that he was told to withhold payment on claims until the policyholder submitted documents not even required under the terms of the policy.

In May 2008, NAIC announced it had broken a settlement between Conseco and 39 states and the District of Columbia over a pattern of abuses in its long-term care business. As part of the agreement with state insurance commissioners, Conseco and its subsidiaries were fined $2.3 million and ordered to pay $4 million in restitution to policyholders. The company also agreed to invest $26 million in its claims processing system. If it fails to improve its service, Conseco will be ordered to pay an additional $10 million in fines. In addition to meeting these monetary obligations, Conseco must review its handling of past claims and set up systems to insure that future claims are treated fairly and handled in a timely manner. The company must reviews and readjust 1,112 denied claims, notify an additional 18,000 policyholders regarding 49,000 claims that were partially denied or denied after an initial payment was made, revise its claimshandling procedures and set up a toll-free call center for consumers who believe their claims were not handled in good faith.