Two Leading Providers of Disability Insurance Agree To Resolve FTC Antitrust Concerns

Two of the nation's leading providers of individual disability insurance have agreed to resolve Federal Trade Commission antitrust concerns arising from their merger. The proposed agreement between the Commission and Provident Companies, Inc. and UNUM Corporation would require the companies to continue to submit individual disability insurance data to an independent entity responsible for aggregating and disseminating industry-wide actuarial information.

Provident and UNUM are two of the leading providers of disability insurance sold to individuals, the agency said. Disability insurance protects against loss of income due to disability from sickness, accident or injury. Individual disability insurance is purchased by consumers themselves, who individually hold policies. Policies are underwritten based on the applicant's medical background, financial portfolio, and income projection, and occupation. Total premiums from individual disability insurance policies were over $4 billion last year.

According to the FTC, most insurers who write individual disability insurance rely on historical claims data to make actuarial predictions on probable future claims in order to select risks and price policies. In order to assist insurance providers that have only a limited amount of proprietary claims data, independent entities such as the Society of Actuaries solicit, aggregate and publish industry-wide actuarial tables, studies and reports. Because the combined UNUMProvident will control a large percentage of all industry data, it is essential that the merged firm continue to participate in industry-wide solicitations for data made by the Society of Actuaries and other industry groups designated to conduct industry-wide solicitations by the National Association of Insurance Commissioners ("NAIC"). UNUMProvident's continuing participation is crucial to maintaining the credibility of resulting actuarial projects, the agency said.

The FTC's complaint detailing the charges alleges that the proposed merger of Provident and UNUM would violate antitrust laws in the market for disability insurance sold to individuals by eliminating direct competition between the companies and by increasing the likelihood of collusion in the relevant market. The proposed merger would lessen the incentive for the combined firm to continue to submit data to the independent entities, the agency charged.

The complaint also alleges that timely entry in the market for disability insurance sold to individuals is highly unlikely on the scale necessary to offset the competitive harm resulting from the proposed merger.

The proposed consent order would resolve the antitrust concerns by ensuring that adequate data would be available to existing competitors and to new entrants, which could be critical if the relevant market is to remain competitive. It would require that, for 20 years, UNUMProvident continue contributing individual disability claims data to the Society of Actuaries and/or the NAIC (or NAIC's designee) for actuarial tables, studies and reports. The proposed order would contain terms and conditions that are intended to protect the confidentiality of UNUMProvident's data before and after it is aggregated with the data of other industry participants.

The order also would require UNUMProvident to provide the Commission a report of compliance with the provisions of the settlement within 90 days following the date the order becomes final, and within 90 days of each request for submission of data.

The Commission vote to accept the proposed consent agreement for public comment was 4-0.

A summary of the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, proposed consent order, and an analysis of the proposed consent order to aid public comment are available from the FTC's web site: http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 991 0101)