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

What happens when life insurance companies have to find beneficiaries rather than wait for beneficiaries to file claims?

In the case of the US, it means that more than 89,000 people across the country are receiving a share of $665 million or more in life insurance benefits that many didn't know they were entitled to receive.

New York Gov. Andrew Cuomo attributes the payouts as being the result of a measure signed into law last year which requires insurance companies to try to find beneficiaries rather than wait for recipients to file claims. That makes some sense since many recipients were named by relatives or friends and did not know that they were named beneficiaries under life policies.

"It is only fair for families and individuals who lost loved ones to receive the life insurance benefits to which they are entitled," Cuomo said. "Life insurers are now responsible for proactively identifying policyholder deaths and are making good faith efforts to find people so hundreds of millions of dollars in unclaimed benefits can be paid."

A probe involving New York-based companies turned up more than 18,000 New Yorkers who will now get $206 million in life insurance payouts.

State Financial Services Superintendent Benjamin Lawsky said most of the beneficiaries of these "lost policies" were from middle class, working families. No state-by-state breakdown of recipients was available.

In the case of New York, both the state and insurance companies have developed a "lost policy finder" system on the state Financial Services Department website at www.dfs.ny.gov

Consumers can apply for a search for lost or misplaced life insurance policies and annuity contracts on the deceased. Companies would then begin paying benefits that are due.

These payouts will go directly to beneficiaries as opposed to going to state government offices which would then look for the beneficiaries, years down the road.  That’s more good news…for beneficiaries in the US. Not Canada.

Go to the original WSJ article online