Regulators Question Insurers About Payouts on Life Policies

By: Jim Saunders, The News Service of Florida
By: Jim Saunders, The News Service of Florida


Regulators from Florida and other states hammered insurance executives Thursday with questions about whether companies are trying hard enough to pay life-insurance claims.

Florida Insurance Commissioner Kevin McCarty is leading a multi-state probe that he said could involve more than $1 billion in money owed. Executives from MetLife and Nationwide insurance companies testified under oath during a hearing Thursday ---- but McCarty said the probe involves all of the nation’s largest life insurers.

“At the end of the day, we fully intend to … make sure that promises made (by insurance companies) are promises kept,’’ McCarty said.

The five-hour hearing, which drew regulators from as far away as North Dakota, centered on how insurers use a database with the ominous name of the “Death Master File.’’

The U.S. Social Security Administration maintains the database, which includes various types of identifying information about people who have died.

Regulators question whether life insurers have used the database enough to determine whether policyholders have died --- which, ultimately, can start the process of paying claims.

But Todd Katz, a MetLife executive vice president, said 99 percent of his company’s claims come through more-ordinary channels, such as beneficiaries reporting the deaths of family members. He described the Death Master File as a “safety net” that can help in other circumstances.

“Our goal is to pay every claim that should be paid – pay it accurately and promptly,’’ Katz said.

Regulators, however, repeatedly questioned MetLife officials about the company’s more-extensive use of the Death Master File to find out whether customers with annuities have died.

Essentially, regulators accuse insurers of a double standard in the use of the database: If a company finds out a customer with an annuity is dead, it can stop making payments. But if a customer with a life-insurance policy is determined to be dead, the insurer is required to shell out money.

“It seems to me, that’s a little offensive to people,’’ said Belinda Miller, acting general counsel for the Florida Office of Insurance Regulation.

But Katz said his company is trying to make sure it doesn’t erroneously pay annuities after a customers dies. In such cases, the dead person’s family members could have to pay back the improperly paid amounts.

Thursday’s hearing came a day after the Office of Insurance Regulation announced a settlement with the John Hancock Life Insurance Co. on issues related to the Death Master File.

John Hancock denied any wrongdoing but agreed to pay $3 million to Florida, with $600,000 waived because of the company’s cooperation. Also, it agreed to take other steps aimed at making sure beneficiaries get paid.

Despite the settlement, McCarty said the investigation into the industry’s practices is in the “beginning stages’’ and could take 18 to 24 months. He said many people don’t know their parents or grandparents had life-insurance policies, making it important that the companies follow through on paying claims to beneficiaries.

But MetLife, which faced heavier questioning than Nationwide, indicated that difficulties can occur in paying claims on what are known as “industrial” policies.

Door-to-door agents sold the low-value industrial policies decades ago, and MetLife says it does not have Social Security numbers for many of the policyholders. Executives said that creates problems in trying to match up information from the policyholders with the Death Master File.

But Michael Consedine, the Pennsylvania insurance commissioner, said policy applications included other information that insurers can use to help track down those policyholders. He said the companies also need to use other technology in the searches.

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