In recent years, state regulators of the life insurance industry have been more aggressive in seeking out and finding unclaimed benefits that should be extended to state residents. While it's often not always easy for the life insurers to be as vigilant as many regulatory agencies may like, it is important to keep up those efforts to the highest levels possible for fear of running afoul of those government groups.
Such efforts on the part of state insurance departments are ongoing, and in Pennsylvania in particular they seem to be turning up a significant amount of benefits which have not gone to their intended recipients, according to a report from the office of Pennsylvania insurance commissioner Teresa Miller. Over the course of the first six months of the year, the state found nearly $70.45 million in unclaimed policies that were supposed to go to nearly 4,300 beneficiaries; an average benefit of more than $16,400.
A massive effort
These findings are the result of an ongoing probe being conducted across a number of states nationwide, of which Pennsylvania is considered the front-runner, the report said. Miller is working closely with the office of governor Tom Wolf to identify these benefits, comparing outstanding benefits claims with federal records via the Social Security Administration's Death Master File (DMF). While some companies have been quite attentive in using the DMF to identify potential beneficiaries, others have been a little more lax.
These probes have, in some cases, uncovered more questionable business practices than simply a lack of vigilance on the part of some insurance companies. There is some evidence that a few life insurers which also issue annuities use the DMF to discontinue annuity payments while still not paying out life insurance policies for the same insureds, the report said. Miller said that her office continues to seek out instances where benefits aren't being extended to named beneficiaries on existing policies under these circumstances. Note, however, that these cases are in the minority.
What's another problem?
One of the biggest issues is that beneficiaries are often unaware of the policies. For example, parents will often buy life insurance policies for themselves and pay them off years before death, the report said, and they may forget about buying those policies, or simply never tell their children about them. Often, difficulties in tracking down these beneficiaries are the hardest. Even if the beneficiaries suspect the existence of a life insurance policy, they would have to check with a daunting number of life insurers to verify the policy and notify them of the death.
All of these difficulties mean that life insurers and state agencies will have to work more closely in concert to make sure everyone is holding up their end of the bargain when it comes to paying out benefits on unclaimed policies. This additional effort on the part of the insurers may go a long way to building trust with regulators and the marketplace, preventing such insurers from being hit with greater regulatory controls in the future.