We have talked about the problem of unclaimed life insurance benefits before. In October 2012, for example, we posted about the state of Florida’s settlement with Nationwide Financial Services Inc. regarding its process for identifying insureds and notifying beneficiaries. Nationwide was the fourth life insurer to settle with the state, and consumer advocates and other states’ regulators praised Florida’s enforcement efforts.
According to a lawsuit filed earlier this year, though, these agreements have done little to rectify the problem. Life insurance companies, plaintiff Total Asset Recovery Services says, continue to underreport unclaimed life insurance policies — and not just one or two, but thousands. The result is, the lawsuit states, that the insurance companies continue to hold onto millions of dollars that should be turned over to the state.
Unclaimed benefits pose a problem for the beneficiaries and the state, of course, but not the insurance companies. The insurers can continue to earn interest on the funds, and the law does not require an insurer to turn over to a beneficiary or the state any interest earned between the death of the policyholder and the payout to the beneficiary.
According to Total Asset, its auditors discovered that three companies that settled with the state — MetLife Inc., Prudential Financial Inc. and John Hancock, a division of Manulife Financial Corp. — have failed to report more than 9,000 unclaimed life insurance policies written in the state. Total Asset says the failure to report amounts to a “windfall” for the insurance companies.
The court has dismissed John Hancock from the suit, and the other two companies have filed motions to dismiss as well. The insurers say the accusations are way off base and insist that they adhere to the terms of the settlement agreement in all cases.
For the plaintiff, that’s not really the question. The question is whether the agreement itself is flawed.
We’ll continue this in our next post.
Source: Bradenton Herald, “Lawsuit claims life insurance firms defrauding Floridians,” Jay Weaver, April 14, 2013Share