NEW YORK (Legal Newsline) - One New York law firm says it supports state Attorney General Eric Schneiderman's decision to investigate the way life insurance companies identify deceased insureds and pay death benefits.
Napoli Bern Ripka & Skolnik LLP -- a firm with offices in New York, New Jersey, Pennsylvania, Florida and California -- say purchasers of life insurance policies should feel confident that their family or other beneficiaries will be well taken care of financially after they've passed on.
In July, the New York State Insurance Department directed life insurers licensed to do business in the state to report on how many death benefits they had not paid because they did not use an official government list of deaths to promptly identify when policyholders died.
The department also required insurers to immediately begin using reliable available data to identify when policyholders died and death benefits are due but unpaid.
At the time, the state agency said it was working on a regulation to make the requirement permanent.
According to the department, some life insurers use the U.S. Social Security Administration's Death Master File, an up-to-date list of recent deaths, to promptly stop annuity payments once a contract holder dies.
However, many insurers do not use the same Social Security death data to determine if any death benefit payments are due under life insurance policies, annuity contracts or retained asset accounts.
Consequently, the department required 172 life insurers and fraternal benefit societies licensed in New York to use the available data to find where payments are due, locate beneficiaries, make payments and report on the results beginning in September and continuing for six months.
The state agency also issued to all 172 insurers what is known as a 308 letter, or a request for information to which insurers are legally required to respond. The department asked that each insurer report on the results of using the Death Master File and on their success in finding and making payments to beneficiaries.
At the time, the agency said it was concerned there may be instances where a death has occurred and no claim has been filed.
If a life insurance policyholder dies and stops paying premiums, the company may continue to deduct the premiums from the account value until the value is gone. Or the life insurance policy, annuity contract or retained asset account may just sit dormant, with the funds still available to the insurer to invest, while the beneficiary is not paid, it explained.
The same month, Schneiderman sent subpoenas to nine companies, including units of AXA SA, Genworth Financial Inc., Guardian Life Insurance Co. of America, Manulife Financial Corp., Massachusetts Mutual Life Insurance Co., New York Life Insurance Co., Prudential Financial Inc. and TIAA-CREF.
According to Reuters, the attorney general was seeking information on their practices of identifying and paying out policies, and for details on unclaimed insurance policy proceeds that were supposed to be turned over to the state.
Other states, including Florida and California, embarked on similar insurance investigations earlier this year. The National Association of Insurance Commissioners, a group of top insurance officials, also is looking into such practices.
Napoli Bern Ripka & Skolnik says a number of life insurance companies have failed in their obligation to properly identify and pay beneficiaries after a policyholder had passed on.
"This prompted commissioners to dig deeper into understanding how companies were handling life insurance payouts and they were not happy with what they found," the law firm said in a statement.
Napoli Bern Ripka & Shkolnik says it also is investigating claims into the payment practices of these life insurance companies.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.