Insurance regulators in seven states have reached an agreement with
Prudential Financial Inc. over unclaimed death benefits, requiring the carrier to pay $17 million to settle the allegations.
The deal also will require Prudential to build a system that will use data from the
Social Security Administration and other sources to locate beneficiaries who are owed death benefits. The insurer will build enhanced search practices over a three-year period and check for transposed, missing or incomplete numbers or letters
Social Security numbers and names.
Any unclaimed death benefits will have to be turned over promptly to beneficiaries or to state unclaimed-property officials if the beneficiaries can't be identified.
Insurance regulators in seven states, including California, Florida and Illinois, negotiated this latest agreement with the insurer. Thirteen other states will need to sign on to the agreement by March 31 in order for it to become effective, and thus receive their share of the settlement dollars.
“Our multistate exam revealed concerns with Prudential's practices in the payment of death benefits to the beneficiaries of life insurance policies,” said Michael Consedine, insurance commissioner of Pennsylvania, one of the seven states involved in the deal.
Prudential's agreement comes on the heels of a similar deal it reached last month with a group of 20 states and their treasury departments. That settlement required the carrier to cross-reference its database with the
Social Security Administration's Death Master File and return the policy proceeds to the appropriate beneficiaries. The deal with state treasurers and controllers applied to policies from 1992 to the present, but Prudential has been using the Death Master File since 1998, said the carrier's spokesman, Bob DeFillippo.
State treasury departments have been participating in a multistate audit that began in 2008 to review the insurance industry's compliance with unclaimed-property laws. Carriers were the target of criticism as findings from that audit revealed that the companies were failing to pay some death benefits to beneficiaries or states after learning that a policyholder had died.
Regulators also said life insurers were using the Death Master File to identify decedents and cut off their annuity payments but failed to consult the same database for paying out on life insurance policies.
Insurance departments, meanwhile, have carried out their own parallel investigations, which led to the most recent settlement with Prudential.
The insurer has set aside nearly $100 million to cover expected claims tied to its financial services unit, plus an additional $40 million for its closed block of business.
“Our company remains committed to paying the claims of our customers,” Mr. DeFillippo said. “As the first financial services company to reach agreement on the new standards developed by a task force established by the National Association of Insurance Commissioners, Prudential is pleased to work with our regulators to develop and implement best practices for our industry.”
