Wake up and good morning. If this is true, it's one of the more despicable schemes out there. Florida and other states are investigating whether some of America's largest life insurers are failing to ensure that they pay out on policies of deceased customers.
Preliminary findings by regulators in Florida and California found that some insurers "appeared to have turned a blind eye to data sources that could have revealed that certain policyholders had died and that their heirs were owed money," the Wall Street Journal reports. This happened even as the insurers used the same sources to justify cutting off annuity payments for customers who had died, the newspaper said.
Florida has subpoenaed insurance giants MetLife Inc. and Nationwide Financial Services Inc. to testify at a planned public hearing in Tallahassee on May 19 (details here). A Nationwide spokesman told the Journal the insurer will review the information from the Florida Office of Insurance Regulation and will cooperate with the inquiry. "We stand by our business practices and are committed to serving the needs of our customers," the spokesman told the newspaper. MetLife also said it is cooperating with Florida. A spokesman confirmed in the same story that it is one of 21 insurers being audited by the California Controller's Office.
In a separate Journal story, Florida regulators said the May hearing would look into whether some insurers may use a Social Security database to learn of the death of owners of annuities, which are retirement-income contracts that insurers pay. It wants to investigate whether the same databases are avoided when determining when insurers owe money to life-insurance beneficiaries.
As Florida Insurance Commissioner Kevin McCarty (AP photo, right) told the Journal: "The law does not require [an insurer] to proactively go out and search a database" to identify if a policyholder has died. "However, if you have actual knowledge that someone has died, what does the law require at that point?"
What prompted this in the first place? The Journal states the showdown started after a little-known auditing firm, Verus Financial LLC, three years ago pitched cash-strapped states on identifying unclaimed life policies that those states could seize as abandoned property. Some 35 states agreed to give Verus a cut in hopes that the firm's audit findings would shift hundreds of millions of dollars to consumers and state coffers.
-- Robert Trigaux, Business Columnist, St. Petersburg Times