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Prudential Agrees to Group Life Claim Changes in DOL Settlement

By Allison Bell

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What You Need to Know

  • DOL officials say Prudential denied about 200 group life claims based on lack of evidence of insurability from 2017 through 2020.
  • The company has agreed to limit evidence-of-insurability challenges to claims involving insureds who died within three months of starting to pay premiums.
  • Officials say they would like to see all group life issuers limit challenges based on questions about evidence of insurability.

The U.S. Department of Labor has announced a settlement agreement that could help simplify the group life insurance claim process for clients coping with the loss of loved ones.

DOL lawyers negotiated the settlement agreement with Prudential Insurance Co. of America, to resolve concerns about how the company has dealt with questions about some group life insureds’ insurability.

The settlement agreement applies directly only to Prudential Insurance Co. of America — an arm of Prudential Financial — but Labor officials said they hoped other group life issuers would work harder to verify workers’ eligibility for coverage before collecting premiums from them, rather than raising questions about evidence of insurability when beneficiaries file death claims.

In the agreement, the parties note that Prudential has neither admitted nor denied that it is a fiduciary under the Employee Retirement Income Security Act, and that it has neither admitted nor denied that it has failed to discharge any ERISA-related fiduciary duties.

What It Means

For some clients who are group life beneficiaries, the settlement could lead to simplification of the claim process.

The Changes

Under the terms of the agreement, Prudential can challenge a group life death claim based on lack of evidence of insurability only if an insured individual who dies has been paying premiums for three or fewer months.

Prudential can use concerns about insurability to take coverage back from living group life insureds only within one year after the insured individual has started paying for the coverage.

Details

Prudential ranked third in the United States in group life premiums written in 2021, with a market share of about 10%.

Labor officials began talking to Prudential about changes in group life claim procedures after a the department’s Employee Benefits Security Administration found that Prudential had denied about 200 supplemental life claims, from 2017 through 2020, based on allegations that group life plan participants had failed to provide evidence of insurability.

In some cases, officials said, Prudential denied claims based on lack of evidence of insurability after insureds had been paying premiums since as far back as 2004.

Labor officials say challenging a claim for lack of evidence of insurability, after the insurer has had ample time to ask for the that evidence, is wrong.

“The Employee Benefits Security Administration will take appropriate action against any insurance company that collects regular premium payments from plan participants, and later plays a game of ‘gotcha’ to wrongfully deny benefits based on technicalities like ‘insurability’ after the participant passes away,” Lisa Gomez, the assistant secretary in charge of the Employee Benefits Security Administration, said, in a comment included in the settlement announcement.

Eric Schwimmer, a Prudential Insurance Co. of America vice president, signed the agreement for Prudential.

“Constructive engagement with our regulators is an important component of doing business the right way, which is foundational to our approach to delivering for our customers, while fulfilling our regulatory obligations,” Prudential said in statement. “We have worked with the Department of Labor to resolve this matter. The impacted claims represent a very small subset of supplemental group life insurance claims where employers had collected premiums without obtaining the required documentation. We are addressing this with the small number of supplemental group life insurance customers that are impacted and continue to provide clear guidance to our customers regarding the responsibilities for maintaining evidence of insurability going forward.”

The U.S. Labor Department building in Washington. (Photo: Mike Scarcella/ALM)

Allison Bell

Think_Allison

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