The Massachusetts and Minnesota attorneys general are investigating the way Prudential Financial handled unclaimed life insurance policy death benefits. According to a recent filing with the U.S. Securities and Exchange Commission (SEC), Prudential was also recently informed that an office under the New York comptroller intends to audit its compliance with the state’s unclaimed property laws.
Prudential is just one insurer that has attracted regulatory scrutiny over the way it handles unclaimed life insurance benefits. Insurers are supposed to pay death benefits once they learn a policy holder has died. If they are unable to find a beneficiary, most states require that benefits be turned over to their unclaimed property funds. Investigators in several states have launched probes under the belief that life companies are aware of the death of policy holders when they check the Social Security Administration’s Death Master database, which lists all Americans who die, but knowingly suppress their awareness. However, they have no problem using Death Master information to their benefit, such when as stopping payments to deceased annuitants.
Over the summer, New York regulators ordered 172 companies, including Prudential, to start using the Social Security Administration data to determine when death payments are due. In December, the New York Department of Financial Services announced that since the issuance of that letter, companies had paid $52.6 million in unpaid death benefits. Claims processing has been initiated for almost 28,000 other beneficiaries, the departments.
Last year, the National Association of Insurance Commissioners (NAIC) formed the Investigation of Life/Annuities Claim Settlement Practices Task Force (chaired by McCarty) to guide the multistate examination process. In May 2011, public hearings were conducted on this issue in Florida and California. John Hancock Life Insurance Company reached an agreement with Florida in May 2011 to begin searching public databases to find out of its customers have died, rather than simply relying on beneficiaries to submit death claims.
According to a report from NJ.com, New Brunswick-based Prudential has already signed two multi-state settlements in which the company agreed to improve its practices for identifying deceased policyholders, locating their beneficiaries, or forwarding the money to the respective state unclaimed property offices when a beneficiary can’t be located. New York and Minnesota were not a part of that settlement, while Massachusetts only signed the settlement with treasurers.