'Death Master File' wrongly used, says state insurance commissioner

People could be owed money

SAN DIEGO - Linda Pantarell lost everything in the Cedar Fire back in October of 2003. Including an insurance policy her father had taken out years earlier.

And while she rebuilt and is now back in her home, that insurance policy was long gone and forgotten.  Until California Insurance Commissioner’s office found out she was the beneficiary for a Prudential policy worth $9,000. 

The Commissioner’s office had done a “Market Conduct Exam” on 40 of the biggest life insurance companies in California.

They found billions of dollars squirreled away by the industry.  Investigators found there is a list of people who die every year. That list is provided by Social Security Administration and the insurance industry reviews it.  This list, called a Death Master File, was a gold mine for the insurance companies, investigators said.

Most of us know insurance companies sell life insurance, but they also sell a wide variety of products, including annuities.  An annuity is a form of insurance investment that entitles the consumer to a series of annual payments. They are often purchased as retirement investments because they do offer some tax advantages.

Insurance companies were using this list to identify deceased individuals who should no longer be receiving annuity payments. 

But while the companies would peruse the list to figure out who they didn’t owe payments to anymore, investigators said they weren’t looking at the Death Master File for people they owed money to.  Namely the beneficiaries of life insurance policies.  Like Linda Pantarell who had no idea the policy even existed. 

Insurance Commissioner Dave Jones was adamant  when he told Team 10 about this practice, calling it “just outrageous”.  He said the industry is sitting on billions of dollars earning income by not paying off on insurance policies. 

Jones said what his office found is upsetting because, “the life insurance companies are not using death master list to pay out these benefits.”  He said because of his office, Linda Pantarell got $9,000 owed to her.

Insurance regulators all over the country are going after the insurance industry.  California has received more than $90 million so far. These funds will be held by the state for beneficiaries. Jones said these insurers will not be sitting on such large amounts of unclaimed benefits anymore.

Here are some of the big settlements to date with California, according to the commissioner's office:

MetLife: $42,622,395

John Hancock: $14,085,826

Prudential: $32,609,597

AIG: $2,692,969

State of California Commissioner of Insurance Office

There are still some companies in negotiations with the Commissioner’s Office.  The commissioner told Team 10 these companies have done the right thing.

But Jones said there is no deal with New York Life. As the third largest insurer in the United States, Jones said there is a lot of money still on the table.

We asked the Insurance Commissioner’s Office how people can check to see if they are owed money.  Here is what was sent over to 10News:

They can contact insurers directly and request a search under the name the policy may have been under and can also contact the state controller's office in the state where they believe the policy was purchased, because the companies are required to turn "unclaimed insurance proceeds" over to the state after 3-5 years (that's when they become dormant).  Before Death Master investigations, insurers were NOT turning over the money, they just kept it.  Also, if consumers are approached by a company or individual that want to charge a fee or finder's fee for the search or to claim property held by the Controller, warn them to NOT do business with them.  There is no need to pay ANYONE to search for or file paperwork with the state for unclaimed property; it's all free and available on the controller's web site http://www.sco.ca.gov

Statement from William Werfelman of New York Life regarding 10News story on Death Master List:

"The fact of the matter is that New York Life is already doing what the California Insurance Department wants insurers to do.  Any claims to the contrary are false.  The only issue we have in California is that the Insurance Department seeks to extract a multi-million dollar fine or fee even though there is no basis in the law for such a fine or fee.   

For two years New York Life has been doing what the California Department says we are not doing.  We perform searches of our current in-force life policies against the Social Security Death Master File.  We have also done a rigorous look-back, performing beneficiary searches on any of our life insurance policies that had been in-force at any time since January 1, 1992.  To date we have performed Death Master File searches on over 12 million records.  Once a match is found, we have robust procedures to proactively identify, locate and pay beneficiaries.

If the California Insurance Department identifies anyone that they believe we owe money to, they should let us know. Our company is more than willing to use any reasonable search procedures California implements.  However, we cannot justify the use of policyholder money to pay a fine or fee when there has been no violation of law.

As more and more states have recognized, the appropriate way to address this issue is through uniformly applied new laws and regulations, not targeted enforcement actions against a few companies.  Our principal regulator, the New York Department of Financial Services - not known as a passive regulator - has thoroughly examined this issue and last year promulgated new regulations.  The New York Department did not believe a fine or fee was appropriate.  New York Life is in full compliance with those regulations and the company is following them nationally."   

Matthew Anderson with New York State Department of Financial Services told 10News:

"New York Life has worked with DFS to search for and pay out unclaimed benefits. We feel that they've done the right thing and fixed the problem."

The department also recently issued this press release: http://www.dfs.ny.gov/about/press2013/pr1301291.htm


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