Several thousand New Yorkers are receiving unexpected checks in the mail due to an investigation by the New York State Department of Financial Services (DFS) into life insurance claims practices. According to a DFS press release, regulators started investigating these practices in July 2011. Regulators found that insurers did not pay out life insurance benefits unless the beneficiary made a claim on the policy. The problem is this practice only works if the beneficiary actually knows that he, she, (or it) is a beneficiary. As one might expect, many did not.
The investigation also found that the insurers’ left and right hands did not always work together. Case in point – insurers routinely checked Social Security death records to know when to stop paying certain benefits like annuities, but did not use this same process to know when to pay out policy benefits. NY State now requires that insurers actively search Social Security records to do both.
In addition, new regulations require that insurers coordinate with related entities and look for related policies. When an insurer learns of a policy holder’s death, that insurer is required conduct searches for multiple policies. That insurer must also coordinate with parent companies, affiliates, and other related entities to find any other policies and then notify beneficiaries. Insurers are also required to respond to consumers who may inquire about unclaimed policies.
Currently, insurers have paid out over $665 million to beneficiaries all over the United States. Of that $665 million, more than $206 million in benefits have been paid out to New Yorkers. And this is potentially only the beginning.