To: Ncoil Legislators

DATE: MAY 20, 2011

TO: NCOIL LEGISLATORS

FROM: SUSAN NOLAN

NCOIL EXECUTIVE DIRECTOR

RE: REGULATORS HOLD HEARING ON LIFE INSURERS’

UNCLAIMED PROPERTY PRACTICES

SUMMARY

The Florida Office of Insurance Regulation—in coordination with the National Association of Insurance Commissioners (NAIC)—held a hearing yesterday to review how life insurers handle unclaimed benefits and their process/procedures for complying with state abandoned-property laws. Below, for your review, are the following articles:

·  $1 Billion in Life Insurance Unclaimed? (5/19 MSN Money)

·  Insurance Cops Grill MetLife (5/19 Investment News)

·  MetLife Defends Death-Benefit Approach to Regulators (5/19 Wall Street Journal)

HEARING

During the five-hour hearing, officials from MetLife and Nationwide—by order of subpoena—answered questions about company practices and specific allegations that insurers may be:

·  failing to pay death benefits because they don’t receive a claim after a policyholder dies

·  absent a claim, not doing enough to find beneficiaries of deceased policyholders

·  using a Social Security Death Master File (DMF) database to learn when an annuity owner dies—so that a company can stop issuing payments—but not using it for life insurance, which would require a company to begin paying benefits

·  in some cases, using life-policy cash accounts to pay premiums after an owner dies, then later terminating the contract when these monies run out

METLIFE

During two hours of questioning, MetLife officials noted, among other things:

·  They have used the DMF for annuities since the late 1980s.

·  They began using the DMF for life insurance in the 2000s, but not company-wide until 2007.

·  In 2007—after checking policy records with the DMF—MetLife found $84 million in unclaimed life insurance benefits.

o  Between $49 and $51 million was paid to beneficiaries.

o  $32 million was targeted for escheatment.

·  As of 2010, $325 million has been identified for escheatment to states.

·  Checking life policies with the DMF will now be done at least annually.

·  A DMF “match” must include three points—a person’s SSN, DOB, and name.

·  Unlike annuities—where a DMF “match” triggers the three to five year dormancy period before funds are escheated to states—life insurance requires a death certificate.

·  Absent a death certificate, life insurance benefits are held until a policy “matures,” which is based upon mortality tables that could extend to 120 years of age.

·  Life insurance policies with non-forfeiture protections—where cash values are used to pay premiums and prevent lapse—are restored in full and paid as if a claim was submitted at the time of a policyholder’s death.

NATIONWIDE

During 90 minutes of questioning, Nationwide officials noted, among other things:

·  They use a third-party vendor to check policies against the DMF.

·  Since 2003 and 2004, they have done monthly DMF checks for annuities.

·  Since 2010, they have used the DMF to seek out life insurance beneficiaries.

·  A current review of their life insurance business has found that less than one percent of beneficiaries who are owed money haven’t been found.

·  Like MetLife, Nationwide fully restores policies plus interest if cash value is drawn down after a death.

·  Like MetLife, Nationwide requires a death certificate before the dormancy period can begin.

·  Clarity between insurance and unclaimed property laws would be welcomed.

·  If legislative and regulatory changes are made, policymakers should consider reinsurance impacts.

Please contact Jordan Estey at or call the NCOIL National Office at 518-687-0178 should you have questions.

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