Wake up and good morning. Today, Florida Insurance Commissioner Kevin McCarty kicks off a daylong public hearing to address concerns that some of America's largest life insurers aren't doing enough to identify deceased customers and get payments to their beneficiaries. Officials from at least 15 states are expected to attend. As the Dow Jones wire reports, MetLife and Nationwide Financial Services are scheduled to speak about their practices. The Florida Channel will carry the hearing live.
Says Dow Jones: "Regulators are concerned that these and other big insurers may be turning a blind eye to data sources that could reveal that policyholders have died and their heirs are owed money -- even as the insurers use the same sources to justify cutting off retirement-income payments from annuities for customers who have died."
Slick move by insurers, if true. Much of Thursday's hearing will focus on the insurance industry's apparently selective use of a data base called the "Social Security Administration's Death Master File." Dow Jones reports that McCarty stated Wednesday that insurers are using the Social Security Administration's Death Master File "to stop company payments for annuities -- but do not use this same list to pay beneficiaries of people who have life-insurance policies." Regulators are expected to grill the insurers about why they didn't adopt use of the Social Security death database to identify deceased life-insurance policyholders some years ago, as it became more complete and easier to use.
While MetLife and Nationwide say their business practices are sound and they make proactive efforts to get proceeds to beneficiaries, other insurers are taking more fire. Florida officials announced an agreement (details here) Wednesday with Manulife Financial Corp.'s John Hancock unit to set up a process for aggressively identifying deceased life-insurance policyholders and get death payouts to their beneficiaries, Dow Jones says. Under the Florida pact with Hancock (which comes with a $2.4 million fine), an auditing firm hired by the state will provide Hancock with reports of life-insurance, annuity and other accounts it judges to be unclaimed property that should be turned over to the state. It will match Hancock's records against a Social Security death master list and other sources to create its lists. Consumers who think they may be affected by this John Hancock matter can learn more here. Here's John Hancock's own take on this.
John Hancock reached a similar agreement in April with California regulators, according to this Wall Street Journal story. Here's another WSJ story on how these investigations began. The best coverage headline goes to Fox Business here: Why Your Life Insurance Company Doesn't Care If You're Dead.
(I'm not sure what's more bizarre in writing this post: That Florida regulators are finally exerting basic oversight over insurers, or that some insurers appear so brazen to take advantage of deaths when it benefits them but otherwise ignore their financial responsibilities to policyholders. I'm sure if Florida lawmakers have time, they can rid the state of this silly red tape known as regulation and... presto! Problem solved.)
As Dow Jones reports, it's the little guy who's most vulnerable. "Under the industry's current system of waiting for a claim to be filed before a payout is triggered, tens of thousands of customers -- likely families with smaller policies who don't have lawyers or financial advisers keeping track of money matters -- could be losing out on proceeds, according to industry consultants, executives and regulators."
States, too, have a financial stake in the issue. "Insurers are required by state laws to turn over unclaimed property to state coffers," Dow Jones says. "The current regulatory scrutiny is partly aimed at sizing up whether insurers have been tardy in identifying unclaimed funds and giving them to states."
-- Robert Trigaux, Business Columnist, St. Petersburg Times
Posted by Robert Trigaux at 7:07:07 am on May 19, 2011