New York Officials Target Life Insurance Companies over Unpaid Death BenefitsNov 7, 2011 | Parker Waichman LLP
New York State is intensifying its probe of life insurance companies and their handling of unpaid life insurance death benefits. Late last week, the New York Attorney General and Comptroller announced they would join investigations they started over the summer to make sure that life insurance companies keep promises to beneficiaries and to the state.
New York is just one of several states looking into this issue. Florida, for example, 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.
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. Death Master lists all Americans who have died. Life insurers are generally required to pay claims after being notified of a policyholder’s death and receiving a valid death certificate. In cases were they can't find a beneficiary, some states require payments be turned over to unclaimed property funds.
But in a statement released last week, New York Attorney General Eric T. Schneiderman and State Comptroller Thomas P. DiNapoli said their individual investigations uncovered data that indicated some live insurance death benefit funds may have been improperly withheld from beneficiaries. Over the summer, Scheiderman'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. The Comptroller’s Office began an independent review of life insurance companies using new data-matching methods.
"Together, our offices will undertake the largest and most comprehensive investigation of life insurance practices in the country," Schneiderman said in a statement announcing the investigation.