New York Life Insurance Probe Yields $52 Million in Unpaid BenefitsDec 6, 2011 | Parker Waichman LLP
Since being ordered by New York state regulators to use Social Security death data to identify deceased policyholders, life insurance companies doing business in New York have paid more than $52 million in previously unpaid death benefits to nearly 8,000 beneficiaries. The order, issued over the summer, was part of an investigation launched by the state Department of Financial Services into the handling of unpaid death benefits.
"Our inquiry has already resulted in nearly 8,000 people receiving more than $52 million that was due them, and that is just the beginning. Our findings clearly show that matching life insurance policies against a comprehensive list of recent deaths is essential to ensure that all beneficiaries receive the benefits they are owed," Financial Services Superintendent Benjamin M. Lawsky said in a statement. "And the fact that some life insurers are already using the lists for this purpose and have paid out hundreds of millions of dollars proves it can and should be done. With the initial 8,000 matches resulting in $52 million for beneficiaries, even if a small percentage of the one million preliminary matches result in payments, the total amount of payments could be huge.”
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. The payout figure includes 1,209 payments totaling $16.9 million made to New York payees, the statement said.
In addition to the payouts, life insurers have initiated claims processing for payments to 27,889 other matches, the statement said.
Insurance companies use a Social Security database called the "Death Master File" to cut off payments to deceased policyholders, but do not utilize this tool to ensure that unclaimed death benefits go to their rightful beneficiaries. Over the summer, the New York Insurance Department ordered 172 companies to start cross-checking against lists of policyholders to determine when benefits are due.
Over the past year, life insurance companies have faced scrutiny from regulators in New York and elsewhere over their handling of unpaid death benefits. In November, the New York State Attorney General's Office and the State Comptroller announced the launch of a state 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.
Meanwhile, Florida is chair of a multi-state National Association of Insurance Commissioners (NAIC) task force investigating life and annuity claims practices. The primary charge of the task force is to coordinate the activities of state insurance regulators in pursuing investigations / settlements regarding possible unfair claims practices. Other states on the task force include California, Iowa, Louisiana, North Dakota, New Jersey, New Hampshire, Pennsylvania and West Virginia.