New York Insurance Regulator Directs Life Insurers to Pay Unclaimed Death BenefitsSep 27, 2011 | Parker Waichman LLP
Insurance regulators in New York took steps over the summer to make sure life insurance companies pay out death benefits in a timely manner to beneficiaries. Among other things, the New York State Insurance Department required insurers to immediately begin using reliable available data - including the U.S. Social Security Administration’s "Death Master" database - to identify when policyholders have died and death benefits are due but unpaid. Meanwhile, the Department is working on a regulation to make this requirement permanent.
“The department is concerned that life insurers may not be adopting and implementing reasonable standards for investigating claims and locating beneficiaries,” the New York insurance regulator said in a statement announcing the action.
The Social Security Death Master database lists all Americans who die. Life insurance companies regularly use this database when it will save them money, such as determining when an annuity holder has died so they can terminate payments. But they don't always make use of this database to determine when life insurance death benefits should be paid.
In a letter sent to all 172 life insurers and fraternal benefit societies licensed in New York, the Insurance Department directed them to use the available data to find where payments are due, locate beneficiaries, and make payments. The letter recipients must report on the results beginning September 2011 and continuing for six months.
The Insurance Department said it was also proceeding with efforts to amend the unfair claims practices regulations to require life insurers to perform regular Death Master cross-checks and to require life insurers to request more detailed policyholder and beneficiary information, such as social security number and address, to facilitate identifying deceased policyholders and locating and making payments to beneficiaries in the future.
The Insurance Department sent its letter shortly after it was revealed that the New York Attorney General'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 as part of its probe into the payment of unclaimed death benefits. New York is just one of several states, including Florida, California, and Connecticut, investigating the payment of unclaimed death benefits. The National Association of Insurance Commissioners, an alliance of the states’ top insurance officials, has also formed a task force to look into such practices.
All of the investigations are focused on whether or not life insurance companies are doing enough to identify deceased insureds and make payments to beneficiaries. The investigations are also looking into whether insurance companies are turning over unclaimed policy proceeds that are supposed to be turned over to state unclaimed property funds when they are unable to locate a beneficiary.