As states intensify their investigations into the handling of unclaimed death benefits by life insurance companies, two Ohio firms —Western & Southern Mutual Holding Co. and Columbus Life Insurance Co. — find themselves named in a federal lawsuit claiming they neglect to routinely compare sold policies to the Social Security Administration’s “Death Master File”. Insurance regulators and other consumer advocates contend that such a practice would ensure that beneficiaries are paid unclaimed death benefits in a timely manner.
The Death Master File is a database maintained by the U.S. Social Security Administration (SSA) listing all Americans who have died. Insurers use the database to stop annuity payments that end at the payee’s death; however, according to regulators in several states, insurers are not using the file to identify deceased policyholders to make certain that beneficiaries are appropriately paid death benefits. Because of this, life insurance benefits—to the tune of about $1 billion nationwide, according to Best’s News Services—go unclaimed because beneficiaries don’t know they are entitled to a death benefit.
Rita Koenig, 85, the lead plaintiff in the Ohio lawsuits, is requesting class status for her lawsuit. Koenig is accusing Western & Southern and Columbus Life of breach of contract with an undisclosed amount of policyholders by not paying benefits owed, according to A.M. Best Company. The complaint seeks an injunction to mandate the companies scan the Death Master File yearly for all policyholders with a 70% mortality probability or greater to ensure those policies do not owe unpaid benefits, A.M. Best added. The case is pending a ruling by U.S. District Judge Dan Polster on a request by Koenig’s attorneys to remove the case to state court. However, the insurance companies have argued that it should remain in federal court, said A.M. Best.
The National Association of Insurance Commissioners, an alliance of the states’ top insurance officials, has formed a task force review death benefit practices and has formed a task force made up of 85 states, said A.M. Best. Meanwhile, New York Attorney General Eric Schneiderman just issued subpoenas to nine companies requesting information on unclaimed insurance policy proceeds that should have been turned over to New York State, wrote A.M. Best. The companies involved are 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.
In addition to Ohio and New York, regulators in California, Connecticut, and Florida are looking into the matter in their states.