Now several owners of AIG stock, including the leaders of big union and pension funds, are requesting the removal of Orr from AIG’s directorship. The stock owners made their appeal to the three AIG trustees appointed by the federal government. The decadent bonuses, they claim, were awarded to the same AIG executives who were responsible for AIG’s catastrophic losses.

It seems as though Orr’s special form of business ethics become a central part of the corporations he leads. He served as Unum’s CEO for many years in the 80s and 90s when the company called Portland, Maine, home, and many credit him for turning Unum into a multi-billion dollar disability insurance provider. Orr was in charge of Unum when it merged with the Tennessee-based Provident Companies, becoming UnumProvident. The company recently renamed itself Unum.

Unum’s success, however, was ill rooted in a discovery that the company could make more money on disability claims by denying as many of them as possible. The company routinely challenges legitimate disability claims, devises cost cutting schemes that frustrate and confuse its claimants, and generally works very hard to avoid helping the people it’s supposed to serve. At one time, Unum even gave out “Vulture” awards to employees who denied the most claims.

The American Association for Justice (AAJ) recently ranked Unum number two in its published list of Ten Worst Insurance Companies in America.

The request to remove Orr from AIG came from the American Federation of State County and Municipal Employees Pension Plan, the Connecticut Retirement Plans and Trust Funds, and the American Federation and Congress of Industrial Organizations Reserve Fund. The stock holders did not request any other AIG Directors be removed.

SOURCE: Unum Denied Disability Claims › AIG’s self indulgence linked to Unum’s former CEO

Lawsuits against the insurance giant began almost immediately after its merger in 1999. Unum (formerly named UnumProvident) was formed by the merger of Portland, Maine’s Unum and Chattanooga, Tennessee’s Provident. In 2002, the company was sued by a group of attorneys representing denied disability claimants.

The CBS new program 60 Minutes picked up the story and aired a devastating expose of Unum’s unsound business practices. Its reputation has never rebounded, probably because its ways of doing business have hardly changed.

Unum has been called an “outlaw company” by California Insurance Commissioner John Garamendi and a “rogue firm” by the BBC. Yet Unum reported 2 positive years with a third one in the making despite all the negative press, the major setbacks, and the notorious track record of wrongly rejecting legitimate claims. In 2007 and 2008, Unum professed to have made $679 and $553 million respectively, even though its shares were valued under $2. Latest estimates show Unum profiting at about $2.50 per share, which is remarkable in today’s economy.

Too remarkable, perhaps. According to Barron’s, “One place in Unum’s financials where investors might want to look closely is the company’s reserves for future claims. As insurance icon Warren Buffett points out, reserves in essence are self-graded exams allowing insurers, depending on their assumptions, to boost or punish earnings.”

Barron’s reports that Unum is able to report profits by paring its reserves. “Over the past six years, this account has fallen from 6.3% of Unum’s total reserve (before mark-to-market adjustments) to 4.9% last year,” the report says.

It would be interesting to see whether Unum could post some real profits by changing its ways — however risky or maligned with Wall Street those ways might be – real change from the inside out and not just an image makeover. In this age, with so many of the old economic and political paradigms crumbling around us, it probably wouldn’t be a bad idea for Unum to bank on honesty instead of smoke and mirrors for a change.

SOURCE: Unum Denied Disability Claims › Denying disability may be just one of Unum’s profitability tricks