Category: life insurance

MetLife Announces Multi-State Examination Settlement

Today, we break from one long-running unclaimed property story (the New Jersey gift card legislation) and return to another (the multi-state examination of life insurers’ death benefit settlement practices).  MetLife issued a press release yesterday, announcing that it was adopting “new processes” to govern the handling of claims that do not arise “in the normal course of business.”  Note: the reference to “normal course of business” refers to the fact the policies that were the subject of the examination were those wherein the insured died, but no claim was made on the policy.  See here for a primer.

In any event, the press release announces that as part of these new processes, MetLife will:

  • “periodic[ally] match . . . administrative records against available external sources such as the Social Security Death Master File”;
     
  •  attempt to contact many of its older (over age 90) policyholders; and
  • implement a new online system to make it easier for beneficiaries to find policies.

While the press release does not break down the specific financial terms of settlements with state agencies, it does provide that MetLife is taking a  “$52 million post-tax charge representing a multi-state examination payment . . . as well as the expected acceleration of benefit payments to policyholders under the settlement.”

"But I’m Not Dead Yet": Congress Raises Concerns About the "Death Master File"

Every day seems to bring more news relating to the multi-state investigation into the unclaimed property practices of life insurers.  Most recently, an enterprising asset recovery firm brought a lawsuit against Prudential and MetLife claiming that those firms’ unclaimed property practices have cost the State of Illinois millions of dollars.  Similarly, in the mutli-state examination, unclaimed property regulators have alleged that many insurers reviewed certain Social Security files to determine when to stop paying annuities (which are paid by an insurer until someone dies) but were not using that same information to determine when life insurance proceeds should be paid to the deceased’s beneficiaries.

Central to this investigation is the so-called “Death Master File”, sometimes called the Social Security Death Index (SSDI), which is a listing of all deaths reported to the U.S. Social Security Administration.  Regulators have pushed to make sure that insurers use this information to decide when life insurance benefits are payable.  New York, for example, sent a letter to all insurers in the Empire State and asked them to check the SSDI records against their outstanding policies.

But is the Death Master File a panacea?  Of course not.  So, now there is more news relating to the life insurance investigation, but today, it calls to mind a famous Monty Python skit.  According to an article at LIfeHealthPro, the Inspector General of the Social Security Administration testified before Congress that there are more than 1,000 instances per month where deaths are reported to the SSA, but the person in question . . . isn’t actually dead.  That, as you can imagine, may cause problems such as identity theft or adversely affecting the undead’s credit reports

What this underscores is that property owners still play a crucial role in making sure that their property does not go unclaimed.  While reliance on government databases, public filings and other “official” records can be helpful in finding missing owners, or locating new addresses, such records are never infallible.

Unclaimed Property News Roundup

Asset Recovery Firm Brings Whistleblower Action Against Prudential and MetLife — According to Courthouse News Service, an Illinois asset recovery firm claims to have “discovered” that life insurance companies were not escheating certain benefit assets properly to the State of Illinois.  As regular readers know, the states have been pursuing administrative actions against insurers for this reason for most of the year.  For their trouble, the plaintiff seeks only the thanks of a grateful state . . . and, oh yeah, about $500 million.

Unclaimed Property Mentioned on LifehackerThe personal productivity site Lifehacker is one of our favorites.  A few days ago, Lifehacker ran a top ten list of ways to “Avoid Fees and Get Free Money.”  Along with other suggestions such as switching to a credit union and maximizing those credit card award programs, the article mentioned searching for and claiming unclaimed property as an easy way to increase your funds.

Arkansas Launches Online Unclaimed Property Auction — Arkansas will soon become the latest state to auction off unclaimed property online.  Pursuant to Arkansas Law, the Auditor of State may sell unclaimed safe deposit box property “to the highest bidder.”  According to the Auditor’s website, it will post listings on eBay on the last Friday of every month.  According to the Arkansas News, “technical problems” delayed the first auction scheduled for last Friday.

Unclaimed Property News Roundup: More Insurance Settlements, Wisconsin Unclaimed Property Sales, NJ (Re)Reintoduces Gift Card Legislation

Prudential Settles Life Insurance Inquiry — There is another update with regard to the multistate examination into life insurance benefit payment practices.  When we last left the story in November, Vermont announced a $500,000 settlement with one insurer.  Now, according to the Wall Street Journal, California and Massachusetts have entered into a settlement with Prudential to resolve that firm’s payment of unclaimed life insurance benefits.  As we’ve described earlier, the controversy revolves around the insurers’ use (or, more to the point, alleged non-use) of the macabre sounding “Social Security Death Index” to determine whether or not life insurance benefits have become payable.  Though state laws generally do not explicitly require the use of the SSN index, some regulators have complained that insurers use the SSN Index to stop paying annuities (i.e., products that pay out until death), but don’t use that same information with regard to the payment of life insurance benefits (i.e., those products that pay out upon death).  The article in the Journal did not contain a settlement amount, but did indicate that the states “anticipate that tens of millions of dollars will be dispatched to families of deceased policyholders, paid either directly from Prudential or through efforts of states’ unclaimed-property department.”  The article can be found here.  A similar article from Investment News indicates that Prudential has settled with all 20 states involved in the examination.  A press release from Massachusetts on the settlement can be found here.

Wisconsin Announces Increase in Unclaimed Property Sales — According to a press release issued by the Wisconsin State Treasurer’s office, that state’s sale of unclaimed property generated more than $220,000 in revenue for the state, almost doubling last year’s collection.  The Treasury credits the rising price of gold with much of the increase.  According to the Wisconsin Unclaimed Property Act (Section 177.17), the Treasurer is permitted to sell non-monetary abandoned property to the highest bidder.

New Jersey (Re)Reintroduces Gift Card Legislation — A new legislative year has begun in New Jersey, which means that the State Assembly is again considering legislation to reverse the 2010 changes made to the state unclaimed property law (relating to travelers’ checks, money orders, and stored value cards) , just like was few weeks ago, and just as it did earlier in the year.

New York Regulators Team Up to Investigate Unpaid Life Insurance Benefits & A Scorecard Update

According to an article in Friday’s Wall Street Journal, the NY Attorney General’s Office (the state’s highest ranking law enforcement official) and the NY Comptroller’s Office (the regulator responsible for administering the state’s unclaimed property laws) are both investigating the Empire State’s life insurance companies to determine whether death benefits are being paid on a timely basis.  As we mentioned in July, the controversy revolves around the insurers’ use (or, more to the point, alleged non-use) of the macabre sounding “Social Security Death Index” to determine whether or not life insurance benefits have become payable.  Though state laws generally do not explicitly require the use of the SSN index, some regulators have complained that insurers use the SSN Index to stop paying annuities (i.e., products that pay out until death), but don’t use that same information with regard to the payment of life insurance benefits (i.e., those products that pay out upon death).

As the Journal article points out, insurance regulators in New York sent a request letter to all insurance companies in the state asking them to check their policy lists against the Index.  According to the Journal, the regulators are considering making resort to the SSN index a permanent regulatory requirement.  The regulators have issued a press release concerning their joint investigation.

In separate (but related) news, the Rutland (VT) Herald is reporting that Vermont expects to get in excess of $500,000 from a settlement with a national life insurance company regarding the death benefit investigation.

Life Insurance Probe Scorecard – Nevada Brings in $1M and Investigation Expands to 20

The life insurance probe continues.  As we’ve mentioned a few times (as recently as last week), a number of states (35 at last count) were looking into the death benefit payment practices of life insurers. In particular, the investigation seems to be focused on whether the insurers are properly determining when death benefits are due to beneficiaries. The states allege that the insurers have traditionally actively researched death index information for annuity products (i.e., where the insurer was paying benefits until the policyholder died) but not using those same sources to determine when life insurance benefits became payable to beneficiaries.

We know that at least one company paid California $20 million  to settle unclaimed property claims, as well as $3 million to Florida, and that the investigation has expanded to at least 35 states and 10 insurers.  Now, we can chalk up another settlement.  According to Fox 5 Las Vegas, Nevada “will receive approximately $1 million as the result of an agreement with insurer John Hancock over unclaimed life insurance and annuity contracts.”  More worthy of attention is the article’s mention that the investigation now includes 20 insurers.

Thus far, the current stats are:
– states involved: 35 (not sure if it is 35 plus D.C., or 35 including D.C., we’ve seen it both ways)
– insurance companies under investigation: 20
– settlements:  at least $24 million
– potential exposure:  unknown (but possibly in the billions – with a b)

Also worth noting, last week the New York State Insurance Department issued a directive requiring all 172 life insurers authorized to do business in New York to use the Social Security Administration’s Master File to identify death benefit payments that may be due.

Life Insurance Probe Continues – New York Gets In On The (Martin?) Act

As mentioned a few times before, a number of states (35 at last count) were looking into the death benefit payment practices of life insurers.  In particular, the investigation seems to be focused on whether the insurers are properly determining when death benefits are due to beneficiaries.  The states allege that the insurers have traditionally actively researched death index information for annuity products (i.e., where the insurer was paying benefits until the policyholder died) but not using those same sources to determine when life insurance benefits became payble to beneficiaries.

According to an article published yesterday on Bloomberg.com, the New York State Attorney General’s office has issued subpoenas to 10 insurers (presumably the same ones under investigation by California) seeking “documents and information related to the companies’ procedures around abandoned property.”  The article also raises the spectre that New York could use the 1921 Martin Act to gather information and punish violations.  In the Martin Act sounds familiar, it’s because that same law was previously used by a well-known New York Attorney General to aggressively investigate allegations of securities fraud.

California Investigation of Insurance Companies Expands to 10 Insurers

We recently posted a few articles about California’s investigation of life insurers’, the expansion of that investigation to other states, and the eventual multi-million, multi-state settlement between John Hancock and 35 states regarding escheat practices.  Now, according to an article published on insure.com, California is investigating 10 more insurers regarding their payment of death benefits.  According to the article, California’s investigation has expanded from John Hancock to include MetLife, Prudential, Nationwide, The Hartford, Sun Life Financial, New York Life, Lincoln National and Aegon Group, which includes Transamerica and Pacific Life. 

Based upon similar hearings that have been conducted by the Florida Department of Insurance, the total amount of unclaimed funds owed to the states may be in excess of $1 billion.

John Hancock Reaches Settlement With Verus

A little while ago, we posted a short article concerning John Hancock’s settlement with the State of California regarding unclaimed life-insurance proceeds.  We later took a brief look at the expansion of that inquiry to some 35 states represented by a third-party unclaimed property auditing firm.  Today, the Florida Office of Insurance Regulation announced a multi-million, multi-state settlement of the John Hancock investigation.  As discussed elsewhere, the regulators alleged that many insurers reviewed certain Social Security files to determine when to stop paying annuities (which are paid by an insurer until someone dies) but were not using that same information to determine when life insurance proceeds should be paid to the deceased’s beneficiaries.

John Hancock denied any wrongdoing, but did agree to (among other things) make certain payments to the Florida agencies investigating the issue, to established a dedicated fund to pay identified beneficiaries, and to make certain periodic reports to the regulators.  Separately, John Hancock announced that it has tentatively reached a global settlement with Verus, the third-party unclaimed property auditing firm representing some 35 states.  According  to John Hancock’s press release, the global settlement “includes an extensive plan and timetable to identify abandoned property, conduct due diligence, and report and remit the property to states in those instances where the owner cannot be located” as well as other “prospective business practices . . . which are beyond what current law requires.” 

As recent articles have indicated, John Hancock is only one of a number of insurers who are facing this type of investigation.  It may well be that this settlement is just the beginning of the story.

A Closer Look at the States’ Aggressive Pursuit of Life Insurers & A Programming Notice

Recently, we touched upon a recent settlement between a life insurance company and the State of California concerning unclaimed life insurance proceeds.  It appears that that settlement was just the tip of the iceberg.  As reported in the Wall Street Journal, approximately 35 states are currently in the process of auditing almost two dozen life insurers regarding their payment of death benefits.  As mentioned in the article, those audits are being conducted by a third-party unclaimed property auditing firm, which, according to the article, may be entitled to collect “a 10.5% cut of the sum turned over to the state.”  So, what exactly is this all about?

Under the unclaimed property laws of most states, matured or payable life insurance proceeds are deemed abandoned (and thus, subject to escheat) 3 or 5 years after the insurer’s duty to pay is triggered.  For example, pursuant to the 1995 Uniform Unclaimed Property Act:

[An] amount owed by an insurer on a life or endowment insurance policy or an annuity that has matured or terminated [is deemed abandoned] three years after the obligation to pay arose or, in the case of a policy or annuity payable upon proof of death, three years after the insured has attanained, or would have attained if living, the limiting age under the mortality table on which the reserve is based.

1995 Uniform Unclaimed Property Act, Sec. 2(a)(8).

The statute is seemingly straightforward, so what is the problem?  Well, while the law is clear that the amounts are deemed unclaimed 3 years after the obligation to pay arose, for a life insurance policy, that generally translates into 3 years after the death of the insured.  But how should the holder know that the insured has died?  Therein lies the controversy.  In most situations, of course, either an heir or the administrator of the deceased’s estate will notify the insurer that the policy has become triggered, and often there is no issue.  Instead, the crux of the dispute centers upon what, if anything, the holders are required to do to determine whether or not an insured has died in the absence of such notification.  Because this topic may come up in our professional capacity, we are not going to analyze this question in any great detail except to say that the unclaimed property laws are generally silent as to how (or whether) the insurer has such an obligation.  At the same time, however, the states allege that the insurers were actively researching for such information regarding annuity products (i.e., where the insurer was paying benefits until the policyholder died) but not using those same sources for the payment of death benefits. 

The article is well worth a read, and has interesting sidebars concerning the “life” of unclaimed property and how to find it. 

Also, we are pleased to announce that we will be introducing a new feature tomorrow on this blog:  “Meet Your Escheator,” where we publish an interview with a state unclaimed property adminstrator.  We are pleased to announce that our first participant is Missouri State Treasurer Clint Zweifel.  Please check it out tomorrow.