New York Focus on Unpaid Life Insurance Benefits Nets Millions in Payments to Beneficiaries

New York State regulators’ decision to look into the handling of unpaid life insurance benefits appears to have already produced results. According to a report from Reuters, life insurance companies have paid more than $50 million in benefits to nearly 8,000 beneficiaries since New York started its push earlier this year.

Generally, life insurers are required to pay claims after being notified of a policyholder’s death and receiving a valid death certificate. If a beneficiary doesn’t claim a death benefit on their own, insurance companies can use a database prepared by the Social Security Administration called “Death Master,” which lists all Americans who die in order to make sure death benefits are paid to rightful beneficiaries. It is known that insurance companies use the database for other parts of their business – for example, to cut off annuity payments when a recipient die – but they often ignore it when it comes to paying out claims. Not surprising, as paying out benefits costs the companies money.

Over the summer, the New York Insurance Department ordered 172 companies to start using the Social Security Administration data to determine when death payments are due. The department also announced it was taking steps to amend New York’s unfair claims practices regulations to require life insurers to perform regular Death Master cross-checks and to require that they request more detailed policyholder and beneficiary information to facilitate identifying deceased policyholders.

Now, Reuters is reporting that since that order was issued, life insurance companies have paid $52.6 million in unpaid death benefits. Claims processing has been initiated for almost 28,000 other beneficiaries, according to a statement from the New York Department of Financial Services. The earliest year of death for which a benefit payment has been made thus far is 1970, and the largest benefit payment made thus far is $673,485. Insurers are required to pay interest on delayed payments.

Several states have opened investigations into the handling of unpaid life insurance death benefits over the past year. In November, the New York State Attorney General’s Office and the State Comptroller announced the launch of a joint investigation into such practices, after their offices uncovered data that indicated that millions in insurance death benefit funds may have been improperly withheld from beneficiaries. The announcement came after Attorney General Eric Schneiderman 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, over the summer.

In May, the John Hancock Life Insurance Company 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 one such investigation, and to establish a $10 million fund for paying beneficiaries who can’t be contacted. The National Association of Insurance Commissioners, an alliance of the states’ top insurance officials, has also formed a task force to look into death benefit payment practices.

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