It has been a long wait for many beneficiaries of policies issued by life insurers in the state of New York but after what have in some cases been decades they are finally receiving what is due to them.
Thanks to pressure brought to bear by the state financial services regulator, the Department of Financial Services (DFS), insurers have made payments totalling $52.6m to 7,934 beneficiaries. Many more are still coming.
The DFS’ probe was prompted by an investigation carried out by California’s State Controller, John Chiang. In early-2011 his investigation culminated in John Hancock, the US unit of Canadian insurer Manulife Financial, agreeing to make good its failure to pay more than 6,400 beneficiaries of life insurance policies and matured annuities. The total sum involved was $20m on unpaid policies dating back to 1992.
The California example prompted regulators in at least 36 states to launch probes into unpaid death benefits. In New York, the earliest year of death for which a benefit payment has been made as a result of the DFS’ probe is 1970. The largest benefit payment made thus far is $673,485.
In a statement, the DFS slammed many insurers for not make full use of the US Social Security Administration’s Death Master File which provides an up-to-date list of recent deaths. Many insurers, noted the DFS, have used the data to promptly stop annuity payments once a policy holder dies but have not used it to determine if any death benefit payments are due under life and annuity policies and retained asset accounts.
Not all insurers are at fault, noted the DFS. A small number of insurers have been performing regular cross-checks for a number of years, including MassMutual and Prudential Insurance Company of America. Some other insurers have more recently adopted regular cross-check procedures, including MetLife. The DFS noted that efforts began by some life insurers prior to the department’s inquiry produced an additional $299m in payments to beneficiaries.
More payments are certain to follow. According to the DFS, insurers are have initiated claims processing for payments to 27,889 additional beneficiaries and are checking a further 950,000 policies of deceased policyholders.
