What happens to life insurance proceeds if the beneficiary has no idea he is on the policy? This is not a philosophical question or open to an "if a tree falls in the forest" debate. The law anticipates that this will happen, and state agencies like the Florida Department of Financial Services and the Office of Insurance Regulation do what they can to enforce the laws.
Over the past few years, Florida and other states have entered into agreements with major life insurance companies about what the insurers will do to locate beneficiaries when an insured dies. Still, according to the plaintiff in a recent lawsuit, Total Asset Recovery Services, insurers continue to fall short of their obligations.
The law requires insurance companies to turn over unclaimed benefits to the state. Under the settlement agreement, the insurers are to compare their rosters with the Social Security Death Master File. If the insurer has not located the beneficiary in five years, the payout goes to the state.
The plaintiff says that in thousands of cases the insurers have only turned over a small portion of the total benefit owed to the state. There are millions of dollars, Total Asset says, sitting in insurance companies' accounts that should be deposited with the state.
According to Total Asset, the agreement allows this to happen because it does not go far enough. Insurance companies are allowed to hold on to the funds if, for example, a person's Social Security number and birth date do not match exactly in file to file. The investigation stops when the discrepancy comes to light; the insurer need look no further, and that's fine under the terms of the agreement.
We'll wrap this up in our next post.
Source: Bradenton Herald, "Lawsuit claims life insurance firms defrauding Floridians," Jay Weaver, April 14, 2013