Nationwide last week joined the walk of shame of major life insurance companies whose lax attitude toward unclaimed policies has?prompted regulators to intervene.
In 2008, the National Association of Insurance Commissioners formed a multistate task force to investigate how the life insurance industry handles unclaimed death benefits.?The task force estimates that life insurers have failed to pay more than $1 billion in death benefits over the years, largely due to the common practice of requiring beneficiaries to file a claim following a death.
Regulators found that Nationwide, like other life insurers, used the Social Security Administration's Death Master File, the most definitive list of Americans who have died, to closely track and cut off the payment of annuities when a policyholder dies. That's common practice because policyholders only receive annuity payments while they're above the lawn, so to speak.
The problem is, Nationwide, like other life insurers, failed to use the Death Master File to identify deceased life insurance policyholders and pay the death benefits due their heirs.
In a settlement involving seven states, Nationwide paid $144.1 million to beneficiaries and $7.2 million to states in 4,747 unclaimed death benefits. Like other insurers that appeared to have cheated death, so to speak, Nationwide admitted no liability.
Under terms of its agreement, Nationwide must crosscheck its life policies against the Master Death File every month to locate the beneficiaries of unclaimed policies. If unable to locate beneficiaries, the insurer must pay the policy benefits to the unclaimed property division of the state where the deceased? resided. Some states allow insurers to retain unclaimed policies on their books until the insured would be at least 95 years old.
Nationwide joins John Hancock, MetLife and Prudential in reaching settlements. Other companies still under task force review?include American International Group and Lincoln Financial.
As I noted in a previous blog, a 2011 telephone survey by the accounting firm Deloitte revealed that 1 in 4 respondents don't trust life insurance companies or agents. The industry's?self-serving nonchalance toward beneficiaries?is?one of the reasons why.
The good news is, insurance regulators are taking steps to reform some of the more outrageous practices.
What remains to be seen is whether the life insurers themselves will change their ways and rebuild that bond of trust, or simply pay their penalty and revert to business as usual.
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Source: http://www.bankrate.com/financing/insurance/nationwide-caught-cheating-death/
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