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$1 billion in life insurance unclaimed?

40 of the nation's largest life insurance companies have not tried to find policy beneficiaries, commissioner says.

By MSN Money Partner May 19, 2011 6:36PM

This post comes from Ed Leefeldt at partner site


Calling it a "conservative" estimate, Florida Insurance Commissioner Kevin McCarty says 40 of the largest U.S. life insurance companies may owe policy beneficiaries more than $1 billion.


McCarty made the claim after completing the first stage of an evidentiary hearing today on how life insurers were using the Death Master File, a Social Security Administration list of those who have died.


The nation's largest life insurer, MetLife, was grilled by McCarty, who heard testimony that MetLife has been using the Death Master File since the late 1980s to determine when to halt annuity payments to its clients but did not use the list until 2007 to determine whether an insured had died so his or her beneficiaries could be paid.

And the company only began using it in a systematic and comprehensive way toward the end of 2010, according to MetLife representatives who were subpoenaed and testified under oath at today's hearing.


Nationwide Financial senior vice president of life operations Peter Golato testified that his company had run a check of its life insurance policies through the same process it uses for annuities.


''As a result of that scan, we found that approximately 1,000 policies or less than one-tenth of 1% of our book of business matched positive, where the policyholder may have passed away and benefits may be due. While only a tiny fraction of our life business, we have already found more than 70% of these policies' beneficiaries and are in the process of assisting the beneficiaries in making a claim so we can deliver all benefits including interest," he said. 


35 insurance investigations

Asked after the meeting the total amount all insurers likely owed, McCarty said it was difficult to determine, but estimated "somewhere north of $1 billion."


At least 35 states have begun investigations into whether life insurance companies have failed to find beneficiaries for life policies and how much has either been kept by insurers or "escheated" -- that is, turned over to the states to try to find the rightful owner -- instead of paid to the beneficiaries.


McCarty described those actions as a "pervasive practice," and promised a "broader investigation looking at the largest insurance companies in America." He said the end result would involve 40 companies representing 92% of all the life insurance and annuities in the country.


'Track down anybody'

Regulators who attended the meeting sounded incredulous that MetLife and other life insurers couldn't track down missing beneficiaries when they didn't come forward. Usually it's the beneficiary's obligation to find the insurance company after an insured person dies. But that could change now that regulators are aware that some insurers have used the Death Master File to figure out when to stop paying on annuities, but not when to make payouts to life insurance beneficiaries. It is a situation McCarty calls "a mismatch."

"You can track down anybody these days," said Pennsylvania Insurance Commissioner Michael Consedine.


McCarty touched on, but didn't elaborate on, whether the investigations and the need to reserve more funds for payouts could have an impact on life insurers' earnings and balance sheets.


MetLife didn't directly refute McCarty's estimate of $1 billion, but indicated that in 2010 it paid out $11 billion to policyholders and beneficiaries and escheated only $51 million to the states.


A safety net

MetLife said it will now use the Death Master File, along with other databases and checks, as a "safety net" to avoid missing any beneficiaries. But insurance regulators seemed unconvinced.


"A safety net is only as good as its ability to catch everyone," said Consedine.


Manulife's John Hancock insurance unit has already settled with both Florida and California, agreeing to improve its practices. The settlements "help John Hancock maintain its place in the forefront of caring for our insureds and their beneficiaries," the company said in a press release.


McCarty said that other investigations would continue. California is expected to hold its own hearing on May 23.


The Florida commissioner said that a team of lawyers would look at the John Hancock agreement and put together a "template" of procedures insurers should follow to maximize the matchups between policies and beneficiaries.


'Insurers know'

"We need to establish model laws and regulations," said McCarty, who is the National Association of Insurance Commissioners' president-elect. The NAIC sets the standards for insurance regulation, which is carried out at the state level.


States began investigating this issue because they believed insurers weren't escheating the funds due them. But McCarty said the real victims were "a lot of folks who don't know that their parents or grandparents had policies. The insurers are the only ones who know."


More on and MSN Money:

Aug 20, 2011 9:32AM

A mismatch from the death list?  No it was a conscious decision to just hold out until someone came asking for the money.  Think of all the accrues interest these "scum"panies made just twiddling their thumbs waiting for a claim that they knew probably would never come.


Insurance is a gamble.  By this I mean they take your money in the hopes you do not make or need to make a claim and they keep your premiums.  No claim, the insurance company "wins".  make a claim and the insurance company "looses".  But if they do not win premiums go up.  Talk about a win-win for these scum bags.  If they do not win and the money goes then I expect insurance agents to make minimum wage until they "win" again.  But this will not happen. 

May 19, 2011 7:51PM

Insurance companies ripping people off?  Shocking.  Up to the person getting the payout.  What you don't know won't hurt you.  Typical BS

May 20, 2011 1:46PM
So stupid. When you owe any other debt, does a collection agent find you or do you find them? Collection agencies find you, you don't find them. As the beneficiary to an insurance policy, you are a collection agent and need to find the insurance company and collect. A company is EASY to find. Finding the right John Doe that may not even be alive and may not live in the same place as s/he did when the policy was bought but an insurance company has to go find them?

Let me give you idiots that think this is a good idea a lesson. To find this person, it is going to take employees and lots of them. Employees cost money. If insurance companies have to spend all this money hunting people down, guess who is going to pay for it? You and me via higher premiums!!!

I know which policies have me as a beneficiary and my beneficiaries know who they are. I have a will and a copy of my insurance records in 3 different places. If my wife and I die, my family will be taken care of. The insurance companies won't have to send out a search party at the expense of other policy holders. But now I, a responsible person that has everything in place, will have to pay a higher premium to pay for more employees because some people out there are too stupid and irresponsible to take care of their own business.

Once again the government looks to remove any PERSONAL RESPONSIBILITY from our lives and cast the blame on businesses. Absolutely pathetic!
May 21, 2011 11:35AM
Hello, you are absolutely correct. It is up to the consumer to make sure they are proactive and aggressively go after the life insurance company. They only way they can do that is to make sure which one holds their loved one's policy. Therefore, they need to register it for FREE on the only central database of its kind. This website would solve the problem. Now if only someone with a voice will take note and make it known that this website will definitely solve the problem. Remember, it is up to the consumer and not the insurance companies.
Aug 20, 2011 9:20AM

I had a life polisy that I paid over 10,000 in the yrs I had it I asked if I could get cash out now and they only gave me 3,000 out of what I had paid in what a ripe off.


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