Over 200 claims were denied by the insurer, even though it had been collecting premiums.
The US Department of Labor has accused Prudential Financial of illegally denying over 200 life insurance claims, even after the insurer had continued to collect premiums from the policyholder.
This is only the most recent instance of a rash of insurers denying claims customers have paid for.
A number of life insurance companies have been found to be denying claims made on policies that have been paid into for years.
Many employers include supplemental life plans as a part of their employee benefit packages. This makes it possible for employees to pay an additional premium for the coverage out of their paycheck.
Prudential of Newark, New Jersey has reached a settlement with the US government with respect to what is called “evidence of insurability.” This is a common underwriting practice for supplemental life contracts. It requires an employee to complete a form that shows that they are in good health before the start of the employer-sponsored coverage.
Life insurance premiums have been paid by many employees for years without completing the form.
The settlement detailed how Prudential had been collecting premiums for some of the participants in these employee plans for years – in some cases since 2004 – even though that evidence of insurability form had never been completed.
Prudential had been denying any claims between 2017 and 2020 that did not have the evidence of insurability form completed even though it still collected premiums from the customer since initial enrollment.
The settlement with the US government requires Prudential to pay out life insurance claims regardless of the presence of an evidence of insurability form, as long as it had been collecting premiums for that customer. This, according to a statement from the Department of Labor.
The Department of Labor has reached similar settlements with other insurers for similar reasons. In 2021, it settled with United of Omaha Life Insurance, which had been denying claims payments even after the customer had been paying premiums for years. In 2022, Reliance Standard Life Insurance came to a similar settlement for a similar reason with the Eighth Circuit Court of Appeals, which ruled in favor of a widower who sued the insurer.