2. Unum

2. Unum

CEO: Thomas Watjen
2007 compensation $7.3 million

HQ: Chattanooga, TN

Profits: $679 million (2007)

Assets: $52.4 billion (38)

Unum, one of the nation’s leading disability insurers, has long had a reputation for unfairly denying and delaying claims. Unum’s claims-handling abuses have consistently been the subject of regulator and media investigations.
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There is no better example of Unum’s treatment of policyholders than the case of Debra Potter. Potter, a financial services worker, developed multiple sclerosis and filed a disability claim with her insure Unum. Unum denied the claim and told Potter her conditions were “self-reported.” Potter’s physician responded with a series of memos testifying to her problems, saying “there is no basis to support that her complaints are anything other than legitimate.”
Unum continued to deny the claim for three years, even after appeals from Potter’s employer, BB&T, and after the Social Security Administration had concluded she was totally disabled. Only when Potter hired an attorney did Unum eventually agree to pay the claim.

What makes Potter’s case unique is the fact that she had spent years faithfully selling Unum disability policies as part of a financial services package. “People need safety nets, and that’s what I thought I was selling them, Potter would later say. “But here I am with all my knowledge of insurance and I couldn’t make it work for me.”

Unum has a history of denying and delaying claims. In 2003, then CEO Harold Chandler was forced out after much controversy over Unum’s claims-handling policies. Former employers have gone on record saying Unum
ordered them to deny claims in order to meet cost-savings goals. Internal memos would eventually come to light detailing the company’s plan to move from “a claims-payment to a claim-management approach.” Company executives wrote “[the] return of these claims improvement initiatives is expected to be substantial…[A] 1% decrease in benefit cost… translates into approximately $6 million in annual savings.”

Despite the controversy, Chandler left with $17 million in severance and pension benefits. In 2005, Unum agreed to a settlement with insurance commissioners from 48 states over their claims-handling practices. Under the agreement, the company agreed to reopen more than 200,000 cases and pay $15 million.

In California, where nearly one in every four claims for long-term care insurance was denied, the California Department of Insurance launched an investigation into Unum. The investigation concluded in 2005, and found widespread fraud by the company. According to the report, Unum systematically violated state insurance regulations
and fraudulently, denied or low-balled claims using phony medical reports, policy misrepresentations, and biased investigation. California Insurance Commissioner John Garamendi described the insurer as an “outlaw company.” Yet more recent cases show Unum up to their old tricks. In 2007, the company admitted it had only reviewed 10 percent of the cases eligible for reopening under the terms of legal settlements reached three years earlier. In one recent case, the company denied the claim of a 43-year-old man who had to have a quintuple bypass and several stents put in to expand his arteries. Despite doctor’s orders to stop working, Unum told his he was not disabled and could still work—a decision the U.S. 9th Circuit Court of Appeals would later describe as defying


Unum’s activities, and those of other notorious insurers such as Conseco, arose the suspicions of Senator Charles Grassley (R-Iowa), who asked the Government Accountability Office (GAO) to investigate, and also wrote to Unum CEO Thomas Watjen demanding answers regarding the company’s policies and practices.