Prudential Financial Inc. has settled with Massachusetts and 19 other states, agreeing to improve its practices in identifying beneficiaries who are due unclaimed life insurance death benefits.
The agreement requires the insurer to cross reference its data base with the
Social Security Administration's Death Master File and to find the proper heirs and send them their benefit proceeds. Failing that, the insurer agreed to turn policy proceeds over to the state treasury departments and comptrollers, according to Jon Carlisle, spokesman for the Massachusetts' treasurer.
Prudential's settlement is the latest chapter in a multi-state audit that began in 2008 to review the insurance industry's compliance with unclaimed property laws. Life insurers faced a firestorm of criticism last year as findings from the audit showed that insurers were failing to pay benefit proceeds to beneficiaries or to states after learning that a customer 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 do the same for life insurance policies.
The audit also showed that in some cases carriers were drawing down on a policy's cash reserves to cover the cost of ongoing premiums after the policyholder's death.
In March, John Hancock Life Insurance Co. entered a similar multi-state agreement, paying $20 million in policy proceeds.
Mr. Carlisle noted that there is no precise amount as to how much Prudential will be expected to pay. But Prudential's spokesman Bob DeFillippo noted that the insurer set aside $99 million to cover expected claims related to updating its cross-referencing system.
Some of those enhancements include checking incomplete
Social Security numbers and examining for transposed letters in names or digits in dates of birth or
Social Security numbers, Mr. DeFillippo said.
Prudential is also negotiating a related parallel agreement with insurance regulators in Florida, California, Pennsylvania, Illinois and New Jersey, Mr. DeFillippo said. The five states are leading the effort in a multi-state market conduct exam that's focusing on these issues.
“Prudential remains committed to paying the claims of our customers,” he added. “We've been using the Death Master File to locate people since 1998.”
