The U.S. Department of Labor reached a settlement with Prudential Insurance Company of America to revise life insurance practices that denied claims.
The company is required to revise its practices after it collected life insurance premiums from plan participants but then denied numerous claims when participants died, citing the failure to provide evidence of insurability, according to an April 19 news release. Investigators found Prudential collected premiums despite lacking evidence of insurability and denied more than 200 claims related to supplemental coverage between 2017 and 2020.
“This egregious practice left grieving families without the life insurance for which their loved ones had paid, in some cases, for many years,” Solicitor of Labor Seema Nanda said in the release.
The settlement prohibits Prudential from denying claims based on lack of evidence of insurability when premiums were collected for more than three months, the release reported.
Existing participants will be given additional protections to ensure coverage is not denied after more than a year of premium payments based on insurability or evidence that they were no longer insurable, according to the release. Prudential is required to notify group policyholders of these new processes, and the settlement notes policyholders who collect premiums may be liable for claims by beneficiaries for supplemental coverage if they fail to give notice that Prudential has not approved evidence of insurability.
Prudential has agreed to voluntarily reprocess denied claims dating back to June 2019 and provide benefits for claims previously denied based solely on lack of evidence of insurability, the release said.
The settlement follows an investigation by the department’s Employee Benefits Security Administration and urges other insurers to examine their practices to ensure they are not engaged in similar conduct, according to the release. Assistant Secretary for Employee Benefits Security Lisa M. Gomez said the administration would take appropriate action against any insurance company that wrongfully denies benefits based on technicalities like insurability.
Prudential Financial, founded in 1875, is based in Newark, N.J., and has more than $4 trillion in gross life insurance in force worldwide, the release said.
