December 5, 2011
CUOMO ADMINISTRATION ANNOUNCES THAT LIFE INSURANCE INVESTIGATION RESULTS IN $52 MILLION FOR BENEFICIARIES; MORE EXPECTED
Life Insurers Used Death Database to Save Money by Stopping Annuity Payments, But Not to Identify When They Should Have Paid Death Benefits
Superintendent Lawsky Calls on Life Insurers to Permanently Institute Regular Matches to Ensure Benefits Are Paid
For additional information: David Neustadt, 212.709.1691
The Cuomo Administration announced today that life insurers have already made $52.6 million in payments to almost 8,000 beneficiaries as a result of the Department of Financial Service’s investigation into the industry’s failure to match life insurance policies against a master file of deaths to find benefits that were due but had not been paid. The Department, as part of its investigation, recently began requiring all life insurers doing business in New York to use reliable, available data to identify when policyholders have died and benefits are due.
Some life insurers use the U. S. Social Security Administration’s Death Master File, an up-to-date list of recent deaths, to promptly stop annuity payments once a contract holder dies. However, many life insurers have not been using the same Social Security death data to determine if any death benefit payments are due under life insurance policies, annuity contracts or retained asset accounts.
Financial Services Superintendent Benjamin M. Lawsky said, “Our inquiry has already resulted in nearly 8,000 people receiving more than $52 million that was due them, and that is just the beginning. Our findings clearly show that matching life insurance policies against a comprehensive list of recent deaths is essential to ensure that all beneficiaries receive the benefits they are owed. And the fact that some life insurers are already using the lists for this purpose and have paid out hundreds of millions of dollars proves it can and should be done. With the initial 8,000 matches resulting in $52 million for beneficiaries, even if a small percentage of the one million preliminary matches result in payments, the total amount of payments could be huge.”
The Department’s review makes it clear that life insurers should regularly match life insurance policies against a comprehensive death list, rather than just wait for claims to be filed:
- Matching done as a result of the Department’s review has already produced another almost 28,000 matches for which claims processing has been initiated and another almost one million matches that need further checking.
- Matching efforts begun by some life insurers prior to the Department’s inquiry produced an additional $299 million in payments to beneficiaries.
- A small number of insurers have been performing regular cross-checks for a number of years, including Massachusetts Mutual Life Insurance Company and Prudential Insurance Company of America. Some other insurers have more recently adopted regular cross-check procedures, including Metropolitan Life Insurance Company.
The Department recently sent an administrative 308 letter to 172 life insurers and fraternal benefit societies licensed in New York. The letter directed them to use the Social Security death data, or other available data at least as comprehensive, to identify deceased policyholders of life insurance policies and deceased account holders of annuity contracts and retained asset accounts. The life insurers were then to determine whether any death benefits were due. For benefits due but not already paid, the life insurers were directed to make prompt payments to beneficiaries. The life insurers were required to report their findings monthly beginning October 31, 2011 and continuing for six months.
The Department today issued its first interim report on the information provided to date by life insurers. Nearly all life insurers provided a report for the first month and most had begun to investigate matches, but had not yet started to make payments. Those that did report have cross-checked approximately 79.22 million policy records against death data. This resulted in approximately 2.68 million initial matches. Many initial matches have been eliminated for reasons such as: the policy was not in force at the time of death; the apparent match turned out not to be the same person; or the claim had already been submitted.
There are 950,000 initial matches that still need further checking to determine if they are valid. Life insurers have initiated claims processing for payments to 27,889 other matches. The amount of those payments has not yet been reported to the Department. Meanwhile, 7,934 payments totaling $52.6 million have already been made to individuals, including 1,209 payments totaling $16.9 million made to New York payees.
The earliest year of death for which a benefit payment has been made thus far is 1970, and the largest benefit payment made thus far is $673,485. Insurers are required to pay interest on delayed payments.