Two experienced disability insurance attorneys express concerns for Cigna policyowners
New York Life Insurance Co. has agreed to pay $6.3 billion in cash for a Cigna Corp. unit that sells non-medical insurance policies (including group LTD coverage) to employers. Addressing the sale, Cigna says it’s to focus on its “core growth platforms,” including paying down debt from its purchase of Express Scripts a year ago.
Justin Frankel and Jason Newfield, disability attorneys with the law firm Frankel & Newfield, advise people who have CIGNA disability insurance policies through their employers to take this company news seriously.
Mr. Frankel noted that “when this type of transition occurs, history tells us that it is not a good event for claimants or recently disabled employees with the existing coverage.”
Mr. Newfield noted that sales of disability insurance companies often create an internal employee fear of their employment status and likely reductions in workforce. The result is often “a race to the bottom from the claim handling personnel whose jobs and performance are scrutinized” as cost savings become a measurement of their “value” as employees. The result is that claims will be further scrutinized and many terminated.
Both attorneys have seen an increase in disability claims that have been denied or terminated in similar situations, including what happened following Lincoln Financial’s purchase of Liberty Mutual’s LTD ERISA business, and they expect more of the same from this transaction. In 2017, Hartford Financial Services Group purchased Aetna Inc. life and disability operation caused a similar increase in calls to the law firm from concerned policyowners.
For New York Life Insurance, low interest rates have made products like life insurance and retirement-income annuities less attractive for many consumers. Buying Cigna serves two purposes for New York Life: it gives the company’s cash a place to go, rather than buying bonds, which have low yields right now, and provides instant entry into the employee benefits business.
Group polices are a good revenue source for insurance companies. They are repriced when they come up for renewal, which happens every one to five years. They require less capital to back them up compared to life insurance and annuities. And if claims are denied, or delayed, profits increase with little impact to the insurance company.
New York Life told The Wall Street Journal that Cigna employees would transfer to New York Life, although the acquisition would operate on its own. Cigna sells to midsize and large employers, while New York Life focuses group products on associations and membership groups. That may be window dressing; it’s rare that acquisitions occur in large companies without some kind of restructuring and layoffs occurring.
Cigna disability policyowners are encouraged to call Frankel & Newfield if they have any questions about what this acquisition may lead to for their current or future claims. The law firm of Frankel &Newfield is experienced with disability claims and represents policyholders when their claims are denied, delayed, terminated, or when they are contemplating filing a long term disability claim. For more information, call the firm at 877-583-2524.
The Wall Street Journal (December 17, 2019) “New York Life to Pay $6.3 Billion for Cigna’s Life and Disability Insurance Business”
Forbes (December 18, 2019) “Cigna Will Sell Non-Medical Insurance Unit to New York Life For $6.3 Billion”