Life insurers in New York will be compelled to
pay unclaimed life insurance proceeds following new rules from the
Department of Financial Services (DFS).
New York state governor Andrew Cuomo announced
the new rules on 14 May 2012, which will require all life insurers
in New York to cross-check their policies at least every three
months with recent deaths using the Social Security Master File of
deaths or another database acceptable to the Superintendent of
Financial Services.
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The ruling comes after an investigation by the
DFS in July 2011 resulted in $262.2m worth of claims being
delivered in 32,715 payments to consumers in the US including 7,525
payments totaling $95.9m to New Yorkers.
The DFS’s investigation also highlighted that
this database was used by many insurance companies to stop payments
on annuities after annuitants had died.
Impact of rules
As a result of the new regulation, insurers
must implement “reasonable procedures” to identify unclaimed death
benefits, locate beneficiaries, and make prompt payments.
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By GlobalDataIn addition to the cross-checking of policies
with recent deaths, this means life insurers must:
- When a policy is sold, request more detailed beneficiary
information, such as social security number and address, to
facilitate locating and making payments to beneficiaries when a
death occurs. - search for multiple policies on the same person in the files of
all insurers owned by a holding company. - Cross-check policies with consumer requests received through
the state of New York’s new lost policy finder,
Cuomo said: “People sacrifice to buy life
insurance to help their loved ones after their death, so it’s
reasonable to make sure their families actually receive the
benefits when they are eligible. Our investigation clearly proved
that life insurers should be checking the list of recent deaths as
a standard practice to find out when benefits may be due.”
Benjamin Lawsky, financial services
superintendent at the DFS, said: “Insurance companies will now be
matching their life insurance policy lists with the death index
database on a regular basis.
“Conducting computer matches isn’t much of a
burden and the benefits to consumers are significant. With these
matches and with New York’s new free online lost policy finder, we
have substantially reduced the chances of life insurance policies
not being paid when someone dies.”
