In a continuation of the unpaid
death benefits scandal that hit the US life industry in April, the
Florida Office of Insurance Regulation (FOIR) has become the 23rd
state regulator to reach a settlement with John Hancock.
The US unit of Canadian insurer
Manulife Financial, John Hancock is the first and only life insurer
to have reached a settlement with regulators in an unfolding
investigation in which regulators of at least 36 states are now
involved.
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Under the agreement with the FOIR,
John Hancock agreed to:
- pay the three agencies
involved in the investigation a $3m settlement of which $600,000
was waived due to the company’s ongoing cooperation; - return monies to
beneficiaries, which includes interest payments owed since the date
of death. If a beneficiary cannot be identified, the amount due
will be reported to the Unclaimed Property Division of the Florida
Department of Financial Services (DFS); - establish a $10m fund to
facilitate payment to beneficiaries that cannot be contacted;
and - provide quarterly reports to
the FOIR, to the DFS and to the Florida attorney general for the
next three years, updating information specific to its
implementation of the agreement.
FOIR noted that John Hancock denied
any wrongdoing and asserted that its intention to enter into the
agreement is an effort to modify its future business practices.
“The Office [FIOR] appreciates that
John Hancock stepped-up and agreed to change its processes before
any other company,” said Florida insurance commissioner Kevin
McCarty in a statement.
In John Hancock’s settlements with
23 states and the District of Columbia, amounts involved, with the
exception of those in Florida and California, have yet to be
specified.
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By GlobalDataIn California, John Hancock agreed
in April 2011 to make good its failure to pay more than 6,400
beneficiaries of life insurance policies and matured annuities the
benefits due to them. Accounts impacted date back to 1992 and the
total sum involved is $20m.
The FIOR noted that while
settlements reached in California and other states have pertained
to escheatment laws and unclaimed property, Florida’s agreement
with John Hancock is the first to resolve issues related to
insurance practices, in addition to unclaimed property.
Alluding to the probability that
John Hancock will not be the only insurer to fall foul of
regulators on the non-payment issue, McCarty continued: “Companies
are using the [Social Security Administration] Death Master File to
stop company payments for annuities, but do not use this same list
to pay beneficiaries of people who have life insurance policies.
Unfortunately, this appears to be a pervasive industry
practice.”
Also involved in the investigation
was Florida’s Department of Financial Services.
Its chief financial officer Jeff
Atwater commented: “It is inconceivable that such large companies
are unaware that their policies are cheating hardworking Floridians
out of monies they’ve set aside to prepare for the loss of a loved
one.”
Atwater continued: “The evidence to
date reveals that the inexcusable policies and actions of life
insurance companies have kept Floridians from collecting money they
are rightfully owed.”
Meanwhile in California the state’s
insurance commissioner Dave Jones announced in late-May that his
office would be conducting examinations of the 10 largest life
insurance companies doing business in California. The announcement
followed a joint investigative hearing with State Controller John
Chiang into MetLife’s payment practices.
Adding weight to the probe, the
National Association of Insurance Commissioners (NAIC) announced on
17 May that it has formed a special task force to help coordinate
regulatory investigations involving the claim settlement practices
of life insurers.
The task force is made up of
insurance regulators from 10 states with the FOIR acting as
chair.
Echoing McCarty, the NAIC noted:
“The alleged practices include use of the Social Security
Administration’s Death Master File by insurers for purposes of
terminating payments under annuity contracts, but failing to use
this same information to facilitate the payment of claims on life
insurance policies.”
The NAIC estimates that nationwide unpaid life insurance
benefits exceed $1bn.
