California Insurance Commissioner Dave Jones announced in May that he had opened an investigation into the way 10 large life insurance companies handle <"http://www.yourlawyer.com/topics/overview/Unclaimed-Life-Insurance-Death-Benefits-Lawsuit">unclaimed death benefits. At the time, Jones said he had already uncovered evidence that one insurer – MetLife – failed for two decades to pay money to beneficiaries or the state after learning that an insured had died.
According to a Bloomberg News report, insurers are generally required to pay claims after being notified of a policyholderâ€™s death and receiving a valid death certificate. If they donâ€™t receive notification, they usually are required to hold the funds until the insured would be about 100 years old, plus an additional three or five years, depending on the state, before turning the money over to the state as unclaimed property.
California and other states are investigating the way life insurance companies use the “Death Master File,” a database maintained by the U.S. Social Security Administration (SSA) that lists all Americans who have died. Insurers have used it to cut off annuity payments that end with the death of the payee, but they don’t use it to identify deceased insured in order to make certain beneficiaries are paid death benefits in a timely manner. As a result, it is estimated that hundreds of millions of dollars in life insurance go unclaimed because beneficiaries don’t know they are entitled to a death benefit.
During a May 23 hearing on the issue in California, officials said insurers may have committed several violations of state law, including:
â€¢ Unfair claims settlement practices.
â€¢ Failure to â€œescheat,â€ or turn over money to the state, when beneficiaries could not be found.
â€¢ Failure to adequately control and monitor dormant retained asset accounts, which insurers use to pool benefits that havenâ€™t yet been collected.
California is just one of several states, including Florida, New York and Connecticut, investigating the payment of unclaimed death benefits. In July, for example, it was learned that the New York Attorney Generalâ€™s office subpoenaed nine large insurance companies, including AXA SA, Genworth Financial Inc, Guardian Life Insurance Co of America, Manulife Financial Corp, Massachusetts Mutual Life Insurance Co, MetLife Inc, New York Life Insurance Co, Prudential Financial Inc, and TIAA-CREF.
The National Association of Insurance Commissioners, an alliance of the statesâ€™ top insurance officials, has also formed a task force to look into such practices.
In May, John Hancock agreed to pay $3 million to the Florida Office of Insurance Regulation and other state agencies to cover investigative costs and attorney fees stemming from the investigation, and to establish a $10 million fund for paying beneficiaries who canâ€™t be contacted.