Life insurance beneficiaries are owed more than $1 billion, officials say

If you’ve had a loved one die, you might want to check whether he or she had a life insurance policy: You could be one of millions of beneficiaries across the country who insurance officials say are owed more than $1 billion by dozens of life insurance companies.

A handful of state insurance regulators have formed a task force to investigate the possible failure to pay death benefits to beneficiaries of life insurance policies.

The task force is being overseen by the National Association of Insurance Commissioners. Members of the association contend that insurers have been using a federal death database to terminate payments under annuity contracts, but failing to use that same file to help claims on life insurance policies.

Making good on promises
Life insurance executives insist they’ve done nothing wrong.

“Our greatest responsibility is to make good on our promises to our customers,” Todd Katz, a vice president at life insurer MetLife, said at the California hearing.

Evidence suggests otherwise. At the Florida hearing — where MetLife and Nationwide were subpoenaed to testify — Belinda Miller, Florida’s interim deputy commissioner of property and casualty insurance, said “hundreds of millions of dollars” go unclaimed each year because the life insurance beneficiaries don’t know the money exists.

Life insurers can track the deaths of insured people through the Social Security Administration’s Death Master File, which contains over 87 million records. Insurance companies use this file to, among other things, fight fraud and verify dates of death before paying a policy benefit. But investigators say insurers boost profits by selectively reviewing the death file, withholding payouts, and continuing to pay themselves premiums even though the death file shows the insured person is dead.

“We are troubled about the possibility that insurers may be using death information to boost their finances by stopping annuity payments on one side of the house but not using the same information on the other side of the house to pay policyholders’ beneficiaries who are owed money,” says Jones, the California insurance commissioner.

Jones’ comments came during a joint hearing with State Controller John Chiang into the payment practices of MetLife.

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