MetLife and other major insurance companies are being questioned by 35 states on their claim settlement practices as part of an investigation to determine whether the companies delayed payment to beneficiaries and withheld unclaimed property from states.
A few years ago, several states hired an auditing firm to identify unclaimed life insurance property that the states could seize as abandoned property. Soon after, it was discovered that insurers have been using the Social Security Adminstration's death master list to stop payments on annuity policies since the 1980s — but they may not be using the list to notify beneficiaries when they're owed a death benefit.
According to the National Association of Insurance Commissioners, unpaid life insurance benefits nationwide exceed $1 billion.
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Hearings with MetLife executives have been held in California and Florida.
At the hearing in California, state controller John Chiang said, "I am concerned that the insurance industry is not holding up its end of the sacred bargain it struck with its clients when it issued life insurance policies in the first place."
MetLife executives say that the vast majority of claims come from heirs. They also say that, while the death master list was initially used in the 1980s to identify annuitants, the company has done two sweeps of all its insurance policies using the master death list; one in 2007 and one in 2010, which is still ongoing.
As a result of the 2007 sweep, $51 million was transferred to identified beneficiaries, and another $32 million in unidentified funds was sent to various states.
John Hancock also came under scrutiny for its use of the master death list. In Florida, the company reached a settlement which included a $3 million payment to three Florida regulatory agencies, a return of funds to the beneficiaries (plus interest) and the establishment of a $10 million fund to facilitate payments to beneficiaries that can't be contacted.
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