Some state regulators believe life insurance companies may have failed to pay more than $1 billion in policies over the past decades to beneficiaries who did not file a claim following the death of a policyholder. Now, according to a report from The Wall Street Journal, state insurance regulators are on a crusade make sure companies locate beneficiaries and pay out on these unclaimed life insurance policies.
MetLife Inc., Prudential Financial Inc. and the John Hancock unit of Manulife Financial Corp. have already reached deals with states, agreeing to check their list of insureds against the Social Security Administration’s Death Master database, which lists all Americans who die. As we’ve reported in the past, insurers have no problem using Death Master to stop payments to deceased annuitants, but haven’t routinely use it to track down beneficiaries entitled to death benefit payments. About $1 billion in life and other insurance is expected to be paid out to policyholders and states as a result of the settlements with MetLife, John Hancock and Prudential, the Journal said.
According to The Wall Journal, several other insurers, including American International Group Inc., Lincoln National Corp. and Nationwide Financial Services Inc., are being investigated by a national task force of state insurance regulators. People familiar with the investigation said a settlement could be reached as early as this week.
Other state investigations have already produced results for consumers. Last summer, for example, New York regulators ordered 172 companies, including Prudential and MetLife, 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. According to the Journal, the New York attorney general and the state comptroller have teamed up to work on what they have called a “comprehensive investigation” of death-benefit practices.
Most of the policies the insurance companies haven’t paid on were sold between 1900 and the 1960s, and were sold door to door in working class neighborhoods, The Wall Street Journal said. Insurance companies stopped selling these small policies when critics charged that they were far too expensive for the coverage offered. Insurance companies also stopped keeping track of the polcyholders’ addresses, and lost track of many. While some attempts were made to find the beneficiaries for these policies, they did not devote extensive resources to the task, according to the Journal.