Over the past few years, more work has been done on the part of many states across the country to look into how life insurance companies find beneficiaries of policies for deceased clients. In many cases, these firms were found to have millions of dollars or more in unpaid benefits, and states have since begun requiring greater action from those companies when it comes to seeking out people who may be due large sums of money. However, some insurers say that a lot of these rules are overreaches by regulators.
Since these investigations began, nearly half of the states across the country have passed laws that require life insurance companies to more actively seek out beneficiaries, who in many cases may not even know about the policy in question, according to a report from the Associated Press. Illinois recently joined the ranks of states at least considering such a proposal, but a lot of the national attention on these laws has recently settled on Florida, where the requirements are particularly strict.
What's at issue?
One insurance company that filed a suit against both Illinois and Florida, in an attempt to block at least some aspects of the new rules, noted that it is often written into life insurance contracts that beneficiaries have to seek out the insurers, rather than the other way around, the report said. For that reason, a law requiring insurers to search for beneficiaries technically forces companies to break their own contracts.
"If states can interfere with existing contracts, it is a bad precedent for consumers and the companies that serve them, and violates the U.S. and state constitutions," the company said, according to the news organization.
The ongoing battle
In fact, that Florida case - brought by four different life insurers - is already moving along quickly, according to the News Service of Florida. It was originally filed in May and is before a Leon County circuit court at this time. In the Sunshine State, all life insurance policies written after 1992 would be subject to the new rules, and Sha'Ron James, the state's insurance consumer advocate, recently filed an amicus brief in defense of that legislation.
Other aspects of the constitutional fight in this regard relate back to insurers' contention that the rules violate their right to due process, the report said. The bill was passed by both houses of the state legislature with ease, and signed into law by Gov. Rick Scott.
With all this in mind, the ongoing legal wrangling related to these rules is expected to continue for some time, even if the Florida case gets resolved in the near future. As a consequence, it's vital that insurers know what is required of them in this regard for every state in which they operate. Failure to adhere to the new regulatory controls could result in significant action being taken against them, at least while these rules are still considered legal.