In the past few years, many states across the country have moved to bring more agency to people who think they may have life insurance benefits due to them, but don't know much about the details. In a lot of cases, this meant setting up a database of unclaimed benefits maintained with information collected from all life insurers operating within the state, and greater enforcement of rules requiring more stringent reporting of these issues. However, one such effort in Illinois was recently struck down by the state's governor.
Illinois Gov. Bruce Rauner issued a veto of House Bill 302, which would have required life insurance companies using electronic records to locate beneficiaries of unclaimed policies stretching back to 2000, according to the Madison St. Clair Record. Rauner said he rejected the bill on the grounds that it was unfair to insurers and potentially unconstitutional, on the basis that it would require insurers with electronic records to check data as far back as 2000, but those without it to only go back to 2012.
"An insurer's obligation to comply with HB 302 should not depend on differences in its record retention policies," Rauner said in a veto message. "Such differential enforcement violates due process."
Instead, he said he would have preferred to see a blanket requirement for all insurers to only go as far back as the "clear and logical" end date of Jan. 1, 2012.
What's the need?
Illinois Treasurer Michael Frerichs had been a champion of HB 302, based on the fact that he believed many life insurers hadn't been doing their due diligence to find Illinois residents who might have been listed as beneficiaries for unclaimed life insurance payouts, according to the Chicago Tribune. A previous examination of life insurers' data found about $550 million in unclaimed benefits for Illinois residents alone.
Frerichs' previous efforts led to the passage of a bill about a year ago - which went into effect in January - that required life insurers to confirm they'd paid due benefits for all up-to-date coverage going forward, the report said. HB 302 would have put similar rules in place for previous policies; originally Frerichs wanted that requirement to stretch back to 1996.
On the other hand
For their part, experts say that this coverage often goes unclaimed in cases where people simply don't know they had been named beneficiaries in the first place, according to a separate Chicago Tribune Report. For these reasons and others, insurers argued that HB 302 and similar enforcement efforts on the part of state governments - not just in Illinois but around the country - was overly onerous. Consumer advocates, however, believe there should be a reasonable expectation insurers will try to seek out beneficiaries regardless of whether they know about the coverage.
Nonetheless, those in the life insurance industry that want to navigate the increasingly stringent regulatory environment may need to be a little more proactive in seeking out beneficiaries whenever possible, and ensure their records are as up-to-date as possible.