Insurance regulators questioned MetLife Inc. executives today at a hearing in Florida as they sought to understand the insurer's death benefit settlement practices
The hearing, hosted by Florida's insurance commissioner Kevin McCarty, is part of a 35-state investigation of some 21 life insurers and their claim settlement practices. The hearing was held to investigate whether the insurers were complying with state unclaimed-property laws when distributing death benefits. Those laws require businesses to submit lost or abandoned accounts to states after three years — or five years, depending on the state — of inactivity.
Insurance regulators are particularly interested in insurers' practices. They claim that insurers are using the Social Security Administration's death master list to determine when to end annuity payments — but aren't using the list to decide when to notify beneficiaries that they're due a death benefit.
The hearing took place a day after Florida announced a settlement with John Hancock Life Insurance Co. on the issue. That settlement includes a $3 million payment to three Florida regulatory agencies, a return of funds to the beneficiaries, plus interest, and the establishment of a $10 million fund to facilitate payments to beneficiaries that can't be contacted.
A probe of MetLife's executives revealed that while the insurer had started using the death master list in the late 1980s for its group annuity business, it only started using the list on an ad hoc basis for life insurance policies in the early 2000s. MetLife performed a sweep of its life insurance business, matching its records to the death master list in 2007. As a result, it transferred some $51 million in unclaimed property to states and shifted an additional $32 million to its unclaimed funds system.
Another $325 million is awaiting transfer to state authorities, said Mr. Katz.
A combination of factors delayed MetLife's use of the list for almost 20 years, said Todd Katz, an executive vice president for insurance products. The insurer didn't have Social Security numbers on file for life insurance customers during the 1980s and 1990s, and the technology that would help it improve the matching process has improved markedly in recent years.
When North Dakota insurance commissioner Adam Hamm asked about the delay, Mr. Katz replied that he couldn't say “what was going on through people's minds at the time,” but admitted that “based on internal reviews, we believed we had an opportunity to find some policyholders who may have been deceased.”
Mr. Hamm said later on a conference call with reporters that he was dissatisfied with the response.
Thus far, regulators approve of the insurer's use of the death master list as a “safety net” to catch beneficiaries who haven't filed a claim. It's a “positive step forward,” Mr. McCarty said on a call with reporters.
Regulators are considering pulling together a team of attorneys to examine the agreement John Hancock reached with the state of Florida and put together a template of best practices for life insurers, Pennsylvania's insurance commissioner Michael F. Consedine said during the conference call. There also could be a model law or regulation that would spell out the process carriers would have to undergo to match policyholders to the list.