In recent years, a number of states have moved to address the often widespread issue of life insurance benefits not being claimed by their intended recipients. In Kentucky, one such bill was passed which led to a decent amount of confusion among the life insurers. Now some state lawmakers are moving to pass another law to clarify the first one.
The original Unclaimed Life Insurance Benefit Act was passed in 2012. At issue here is the fact that the law was intended to be applied to all life insurance policies issued in the state, including those from before the law was passed in the first place, according to a report from the Lexington Herald Leader. Originally, the wording of the bill seemed to only apply rules related to how insurers must notify life insurance beneficiaries (as part of "good faith efforts") issued after the law was passed, and was the focus of a subsequent lawsuit from several policy providers.
What's in the new bill?
Because of confusion introduced with the original bill, House Bill 408, which was introduced in the Kentucky House of Representatives in mid-February. The new bill simply clarifies that the good faith effort rule would be applied to all life policies currently outstanding within the state, the report said. That would include using public death records to see if people who controlled policies with those insurers have had their beneficiaries notified of the existence of the plans.
According the report in the Lexington Herald Leader, the initial lawsuit argued that the law did not give the Kentucky Department of Insurance grounds to apply the good faith rules to policies issued prior to 2012, and was upheld by the Kentucky Court of Appeals. That decision was appealed all the way to the state Supreme Court, before new governor Matt Bevin ordered the state to simply drop the case. This decision was so unpopular that the state's attorney general said it would take up the case and now lawmakers, led by Rep. Chris Harris, are moving to make it a non-issue.
Harris believes that many Kentuckians would benefit if the bill passes, the report said. This is because a surprising number of people take out life policies without alerting their beneficiaries, so many may not even know that such benefits exist for them if life insurers don't reach out.
"Allowing insurance companies to just bury their heads in the sand and ignore publicly available information on the Social Security Administration's Master Death File isn't right or fair," Harris told the newspaper. "If they owe it, they should pay it immediately. We are not asking insurance companies to do any more than pay what they owe when they owe it."
The more life insurers can do to comply with laws in this regard, the better off both they and the beneficiaries of unclaimed life policies will probably be. The latter will get the benefits owed to them, while the former will avoid running afoul of any regulatory efforts on the part of state lawmakers.