Across the U.S., large numbers of Americans have life insurance benefits in their names but simply do not know it. As such, they may be entitled to thousands of dollars or more but go without, whether because of a lack of due diligence on the part of insureds or simply because the important information slipped through the cracks.
In either event, state governments have, in recent years, made more of an effort to connect these people with the benefits they are owed. The Insurance Information Institute notes that life insurers have paid some $1.1 trillion in claims to beneficiaries since the turn of the century, and often when someone is not connected with those funds after the policyholder's death, it is the result of a number of factors. These can include insureds not notifying beneficiaries about the details of their coverage, incomplete or out-of-date information, and more.
Unfortunately, it's not always easy for insurance companies to track down beneficiaries of unclaimed policies, and sometimes it is impossible. With that in mind, state governments are increasingly doing more to provide people with direct resources to get the money they are owed. Many of these state-level efforts are now being publicized as September was Life Insurance Awareness Month.
A great success
The National Association of Insurance Commissioners says that from November 2016 to the end of July 2020, it has processed more than 227,500 requests from consumers nationwide who believed they had unclaimed balances in their names. Of that number, more than 1 in 3 — close to 81,350 — resulted in life insurance benefits or annuities being recovered. The total value of those claims was nearly $1.03 billion over less than four years.
This came at a time when the NAIC finds many Americans don't know whether they are named as beneficiaries on any life insurance policies in the first place, and don't have critical information or documents needed to make a claim in the event of the policyholder's death. As such, NAIC president Ray Farmer urges consumers nationwide to adequately prepare themselves and their named beneficiaries for what will happen in the event of their passing, such as by passing along critical information and getting necessary documentation in order.
The efforts in various states
The state of New Hampshire has been using this program since its inception through the NAIC, and in the nearly four years since, it has been quite successful. All told, 758 people have filed search requests with the state's Insurance Department to date, resulting in 283 policy matches, for a total of nearly $2.65 million in claimed benefits. That's an average of more than $9,360 per beneficiary identified.
The state's system works by processing confidential, free search requests and checking the information provided by the consumer against records given to the NAIC by life insurers operating within the Granite State. If that consumer's name is located, the insurer must check its records, and the beneficiary has to provide necessary documentation. Most other states participating in the program work in similar ways.
"The Lost Policy Locator Service can help ease the burden on grieving family members and friends during an already difficult time," New Hampshire Insurance Commissioner Chris Nicolopoulos said in announcing the latest numbers. "September is Life Insurance Awareness Month and I'm proud to help promote this useful tool that all New Hampshire residents can use."
Meanwhile, the Buckeye State of Ohio has found even more success with its program, matching thousands of state residents with more than $20 million in previously unclaimed benefits.
Along similar lines, West Virginia State Treasurer John Perdue is urging residents to do more to understand if they have any unclaimed property of any type held with his office. By internal estimates, about 1 in 10 people in the state have some unclaimed property, including life insurance, on file. He noted that life insurance is a common kind of property that has not been claimed. Since it launched this initiative in 1992, the state has paid out $227 million in unclaimed property to residents, in a state with a population of well under 2 million, and recently upgraded its systems to find even more money or property that remains unclaimed.
What can be done?
As insurers and state regulators makes greater efforts to grapple with the persistent problem of unclaimed benefits on a systemic level, they can also do more to educate consumers. That's true as it relates to both the issue itself, and what would be required of beneficiaries in the event that a policyholder dies. The more that can be done to get that information out there, especially as part of normal communication with insureds, the better off all involved are likely to be.