Insurers may be sitting on $1B in death benefits

Insurers may be sitting on $1B in death benefits
Florida insurance commissioner worried carriers spending more energy on collecting premiums than paying out on policies
JUL 29, 2011
Life insurers may be keeping at least $1 billion in unclaimed benefits owed to policyholders, beneficiaries or states, according to a Florida regulator. Florida Insurance Commissioner Kevin McCarty, who made the estimate, said it was a “conservative number,” in a conference with reporters during a break in a hearing today in Tallahassee. Officials from MetLife Inc., the largest U.S. life insurer, and Nationwide Mutual Insurance Co., the policyholder-owned insurer, were subpoenaed to appear at a hearing by the Florida Office of Insurance Regulation to explain how they determine when policyholders have died. “We want to ensure that insurance companies use as much effort to find and pay benefits as they do to find and collect premiums,” McCarty said during the call with reporters. The hearing, which was attended by representatives from about 15 states, was held to help determine whether life insurers use Social Security Administration death records to stop annuity payments, without using that same data to identify life insurance policyholders who have died. Liability for life insurance begins when the company receives proof of death, which is different than what happens in the annuity business, according to testimony by Todd Katz, executive vice president of insurance products for New York- based MetLife. If annuities continue to be paid out to deceased recipients, the insurer may have to reclaim those payments, he said. Death List Check MetLife began using Social Security data to stop some annuity payouts starting in the late 1980s, Katz said. The insurance company started using the death list to identify some life insurance policyholders' deaths around 2004. The insurer used the death record to conduct a sweep of most of its life insurance policies in 2007 and in 2010 decided it would check the list at least once a year. When matches are made, an investigation begins and beneficiaries are contacted, Katz said. MetLife paid more than $11 billion to beneficiaries in 2010 and turned over $51 million to the states, according to a statement from the insurer. Using the Social Security death list “can be valuable as an aid in preventing errors and fraud and as a safety net to identify the small fraction of deceased insureds and account holders for which the company may not receive a claim in the ordinary course,” a MetLife statement said. MetLife officials have also been subpoenaed to appear at a hearing in California on May 23. The National Association of Insurance Commissioners, the organization of state regulators, said this week it had formed a national task force, led by Florida, to help coordinate investigations into whether companies failed to pay benefits to beneficiaries of life insurance policies. Hancock Settlement The group includes members from California, Illinois, Iowa, Louisiana, New Hampshire, New Jersey, North Dakota, Pennsylvania and West Virginia, according to a statement from the NAIC. Model laws may be established to provide more uniformity for unclaimed benefit practices, McCarty said. Florida's insurance office announced a settlement with John Hancock yesterday, in which the insurer agreed to pay money to beneficiaries with interest dating from the date of death. The settlement also includes a payment of $3 million to the state, of which $600,000 was waived, according to a statement from the insurance office. John Hancock, a unit of Toronto-based Manulife Financial Corp., agreed to restore the full value of more than 6,400 accounts, denied any wrongdoing and also agreed to establish a $10 million fund to facilitate payments to beneficiaries that cannot be contacted, the statement said. “This agreement is consistent with John Hancock's longstanding commitment to keeping our promises to owners and beneficiaries of our products,” the company said in statement. --Bloomberg News--

Latest News

SEC to lose Hester Peirce, deepening a commissioner crisis
SEC to lose Hester Peirce, deepening a commissioner crisis

The "Crypto Mom" departure would leave the SEC commission with just two members and no Democratic commissioners on the panel.

Florida B-D, RIA owner pitches bold long-term plan to sell to advisors
Florida B-D, RIA owner pitches bold long-term plan to sell to advisors

IFP Securities’ owner, Bill Hamm, has a long-term plan for the firm and its 279 financial advisors.

Fintech bytes: Vanilla, Wealth.com forge new estate planning partnerships
Fintech bytes: Vanilla, Wealth.com forge new estate planning partnerships

Meanwhile, a Osaic and Envestnet ink a new adaptive wealthtech partnership to better support the firm's 10,000-plus advisors, and RIA-focused VastAdvisor unveils native integrations with leading CRMs.

Fiduciary failure: Ex-advisor who sold practice fined after clients lost millions
Fiduciary failure: Ex-advisor who sold practice fined after clients lost millions

A former Alabama investment advisor and ex-Kestra rep has been permanently barred and penalized after clients he promised to protect got caught in a $2.6 million fraud.

Why the evolution of ETFs is changing the due diligence equation
Why the evolution of ETFs is changing the due diligence equation

As more active strategies get packaged into the ETF wrapper, advisors and investors have to look beyond expense ratios as the benchmark for value.

SPONSORED Are hedge funds the missing ingredient?

Wellington explores how multi strategy hedge funds may enhance diversification

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management