For years, the Death Master File of the Social Security Administration was a valuable resource for life insurance companies when they needed it, and ignored when they did not.
The file is a who's who of about 95% of Americans who have died over the past 75 years. It includes dates of birth and death, Social Security numbers and even ZIP codes.
Insurers can use the list to find out if a life insurance policyholder has died, at which point they must pay the beneficiaries. According to Florida, California and New York regulators investigating the insurance industry, many insurers have not consulted the file, leaving it up to beneficiaries to track down the policies and claim their money.
In 2011, this came to light when Florida Insurance Commissioner Kevin McCarty asserted that life insurers had held back $1 billion that could have gone to beneficiaries if insurers had only checked the Death Master File to learn whether their policyholders had died. Other insurance regulators quickly followed up. Life insurers already have paid nearly $53 million as a result, according to a statement released by New York State Department of Financial Services Superintendent Benjamin Lawsky.
"Regulators are using the bully pulpit to encourage life insurers to be proactive in starting the claims process," says Wayne Landesman, a former president of the Buffalo Association of Insurance and Financial Advisors.
Social Security Administration reacts
But it looks as if there will be a reversal in beneficiaries' good fortune. As of Nov. 1, 2011, the SSA no longer discloses what it calls "protected state records" of deaths -- essentially any records it acquires from the states, to insurance companies or the public. The decline in the size of the Death Master File is substantial; 4.2 million of its 89 million records will be excised from the public files and made available only to federal agencies.
And of the 2.8 million deaths reported to the file each year, only 1 million will be available to the public. In other words, most recent deaths won't be reported. And that will make it harder to figure out who is owed life insurance money.
Why the change? The SSA says it has discovered it is prohibited from disclosing death records it receives through contacts with the states, according to the SSA website. But the Death Master File has been in existence since around 1980. SSA spokeswoman Kia Green offered no comment on why it had taken the SSA so many years to discover it was doing something wrong.
A magnet for criminals?
Recent attention drawn to the Death Master File by state regulators has made it an attractive resource for criminals seeking personal information for use in scams, says Jamie May, chief investigator at AllClearID.com, an identity theft protection website.
"Thieves are pocketing fraudulent tax refunds after filing returns with personal information about recently deceased children that they found in the Death Master File," says May. "Armed with the deceased child's Social Security number and other personal information, the crooks falsely claim them as dependents."
Insurance regulators are continuing to press life insurers to use the Death Master File, even though information will be limited.
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