In the past few months, Florida and six other states have entered into settlement agreements with three life insurance companies regarding their failure to do due diligence in identifying deceased insureds and their beneficiaries. The states' efforts began a couple of years ago and have already resulted in a number of insurers paying multi-million dollar settlements, revising internal processes or both. See our Oct. 12, 2012, post for information about the deal reached with Nationwide Financial Services Inc.
As we have often said, insurance companies much prefer accepting premiums to paying out benefits. Life insurers have traditionally checked the Social Security Administration's Death Master File against their own records to make sure they were not paying annuities to dead people. When it came to life policies, the insurers expected that the beneficiaries would claim their payouts; insurers made little or no effort to identify the deceased insureds or to find their beneficiaries.
The result, then, was that these insurance companies were holding onto millions of dollars in unclaimed benefits. Most states require that insurers transfer unpaid benefits to the state after a certain number of years, but many insurers failed to do that, either.
Since August, the states' insurance departments have settled with ING Cos. for $10.7 million, Transamerica Life Insurance Co. for $11.2 million and New York Life Insurance Co. for $15 million. All of the companies have agreed to revise their internal procedures, including regular checks against the DMF.
The Department of Financial Services is in charge of unclaimed property here in Florida. According to its website, the department is holding onto more than $1 billion in unclaimed belongings and funds -- including life insurance benefits. Consumers should remember that there is no statute of limitations on unclaimed property: They can claim their property for no fee at any time.
Insurance & Financial Advisor, "New York Life agrees to $15 million death file settlement," Oct. 25, 2013
Insurance & Financial Advisor, "ING agrees to $10.7 million multi-state death benefit settlement," Aug. 26, 2013