US Life Insurers finally do the right thing on unclaimed death benefits

Re: Insurers have been found to be collecting premiums till the accounts are depleted...even though they should or 'did' know that the policy owner was deceased..They have reached a $267M in settlements 

It’s been going on around the US for a year or so…Individual States, squeezing Insurers to come ‘clean’ on death benefits that have remained unpaid instead of going to rightful beneficiaries. Nearly $267M in unpaid death benefits have already been recovered in the State of California alone.

In the US they take unclaimed property/funds very seriously. In the US it’s serious because unclaimed property has been an important part of consumer protection legislation more/less the1940’s. Not so in Canada.

In the US, each state requires ‘holders’ to forward unpaid or unclaimed amounts to them and each State proactively looks for the owners. In the meantime, each State uses the cash, but for the most part there is no deadline for the asset to be claimed.

In the case of life insurance it might be difficult to determine when a death benefit is unclaimed-without knowing if the owner of the policy is actually deceased. The problem is solved by using the ‘death file’ which each insurer runs against their policies to determine the ones where the owner has died. The problem is that in some instances, the insurers, were able to use the ‘death file’ to stop paying annuities but not to stop collecting premiums on policies or to seek the beneficiary out in order to payout the death benefit. 

In California, almost a dozen insurers continued to deduct premiums against policies until all the cash benefit was depleted and then they closed down the account without notifying anyone. Of course, the onus is on the beneficiary to file a claim; but in these cases, there is no disputing the fact that the insurers knew the owner was deceased and in most cases, it was a matter of the beneficiary not knowing that there was a policy.

The state controller, John Chiang said, “it's ethically and morally wrong for an insurer to sit back and do nothing after finding out that a policyholder has passed away….

They should do what they promise," If you're going to spend billions of dollars advertising that you'll be there when people need them, then you should do it. You should do the right thing."

Sheila Bridgeforth, a company spokeswoman, declined to comment but said Prudential believes that "there is nothing more important than honoring our obligations to our policyholders."   Which is apparently the reason they settled up for $47M last year with the State of California which has resulted in beneficiaries like the one noted in the article, receiving death benefits years after they should have. Her Mother died in 1995 and her father passed away in 1999. In 2013, she received $11,000 from their policies. 

Read the full article here from the David Lazarus of the LA Times Dated June 18 2013

LA Times-Life Insurers finally do the right thing on unclaimed death benefits