New York AG Investigating Life Insurance Death Benefit Payouts

The New York Attorney General has launched an investigation into the way life insurance companies identify deceased insured and pay death benefits. According to several media reports, New York Attorney General Eric Schneiderman last month sent subpoenas to nine companies seeking this information, as well as details on unclaimed insurance policy proceeds that are supposed to be turned over to the state.

According to The Wall Street Journal, the subpoenas went to units of 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 Journal learned of the New York state life insurance probe via unnamed sources, as it has not yet been made public.

Regulators in Florida and California embarked on similar insurance investigations earlier this year, and National Association of Insurance Commissioners, an alliance of the states’ top insurance officials, is also looking into such practices, the Journal said

Like the probes in other states, the New York investigation is focused on whether or not life insurance companies are doing enough to identify deceased insureds and make payments to beneficiaries. Insurance companies can use a database prepared by the Social Security Administration called “Death Master,” which lists all Americans who die to make such determinations. It is known that insurance companies use the database for other parts of their business, but not when it comes to paying out claims.

While most insurance policy contracts require beneficiaries to notify insurance companies of potential claims, regulators in other states recently launched similar probes “asking whether that approach is sufficient in an era of robust death database,” the Journal said. The New York Attorney General’s investigation could be particularly potent because it is seeking the subpoenas under the Martin Act, a state law that doesn’t require prosecutors to prove intent to defraud.

According to the Journal, the New York investigation is also looking into the way insurers handle unclaimed death benefits. By law, they should be turned into the state’s unclaimed property fund after a certain time. Thirty-five states are currently performing audits to determine if insurance companies are turning over unclaimed death benefits to their funds in a timely manner.

Meanwhile, the New York Insurance Commissioner is also looking into life insurance payouts, The Wall Street Journal said. It is sending letters to 160 insurers pushing them to use the Social Security database to determine if any death benefits are overdue and report back to the state.

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