Life insurance companies generally rely on the Social Security Death Master File heavily, and on a daily basis, to conduct business, but now it seems that they might have more difficulty doing so in just a few weeks, as a result of a part of federal law of which most may not be aware.
The recently-signed Budget Act included a provision that would place limits on how much non-government entities will be able to access the DMF, which takes effect on March 26, according to a report from Life Health Pro. The provision in question also mandates that the U.S. Department of Commerce must develop a certification program that would allow more responsible access for entities that actually need it in the future.
The problem for many life insurers in particular is that the program is not even close to being ready, and as such that March 26 deadline may come and go, and therefore severely restrict access to the DMF until such time as it can be completed. Consequently, an unclaimed property task force recently convened by the National Conference of Insurance Legislators recommended that an interim rule be put into place as soon as possible as a means of helping to assure continued access for those who need it while the more permanent verification program is being set up.
More potential hiccups
Of course, this isn't an issue that has only been noted in the last few days, just weeks before that deadline will arrive, the report said. Benjamin Lawsky, superintendent of the New York Department of Financial Services, wrote a letter to the Commerce Department back in January highlight concerns about how this lack of access might affect insurers' ability to keep up with the regulatory demands placed on them by both state and federal governments. Later, the Life Insurance Council of New York Inc., cautioned that this could open some companies up to a larger amount of fraud that would, in turn, lead to potentially significant losses.
Life insurance policy issuers will have to keep a close watch on developments in this regard both before and after the deadline, because any changes made by the Commerce Department will certainly impact their abilities to conduct business as normal down the road. Without access to this data, it may be extremely difficult, or even impossible, to verify certain claims made by policyholders or their beneficiaries.