MetLife Inc., the largest U.S. life insurer, will pay about $500 million in a multistate settlement, following a review by regulators of whether companies were holding death benefit funds that should have gone to beneficiaries.
MetLife said that $188 million will be paid this year, and the remaining funds over the next 17 years.
The company said that it reserved for the expense after taking charges against earnings, including one in the first quarter for $52 million.
MetLife said it will use Social Security Administration records to confirm policyholders' deaths.
Life insurers are facing increased scrutiny from regulators in California, Florida and other states over unpaid benefits.
Florida's insurance commissioner said in May that insurers may have accumulated at least $1 billion in unpaid funds.
New York's insurance regulator last year ordered firms to use current Social Security data to determine when death payments are due.
The “agreement will make sure families who have been harmed by MetLife's practices are made whole,” California Controller John Chiang said in a statement. “If the industry isn't willing to make the payments legally required, we will take action.”
Life insurers generally are required to pay claims after being notified of a policyholder's death and receiving a valid death certificate.
A hearing showed that MetLife didn't use information that the insurer had from Social Security data to pay benefits and wasn't forwarding funds to his office as unclaimed property, Mr. Chiang said.
REACHING OUT
More than 99% of claims are submitted by beneficiaries and paid in a timely matter, and the company is implementing monthly reviews to identify additional deaths, it said.
MetLife also will reach out to some of the oldest people it insures, many of whom either don't have Social Security numbers or didn't provide a birth date when their policies were issued. Generally, these people are older than 90, the company said.
California's share of the settlement will probably be about $40 million, with an average value of $1,200 on more than 30,000 policies, Mr. Chiang said.
The accord goes into effect once 20 states have signed on, according to the statement.
MetLife is paying $40 million to state insurance departments, according to a separate statement from Dave Jones, California's insurance regulator.
Prudential Financial Inc., the second-largest U.S. life insurer, previously reached a $17 million deal with the watchdogs.
American International Group Inc., the bailed-out insurer, added $202 million to reserves at its life unit last year after changing its process for confirming policyholders' deaths. A new website, NYPolicyFinder.com, will help life insurance beneficiaries discover funds that they are owed, New York Gov. Andrew Cuomo said in a statement.
An investigation by New York's Department of Financial Services into instances where insured parties died and beneficiaries didn't file claims has led to more than 32,000 payments totaling $262.2 million, he said.
