In a settlement of a multistate investigation, Nationwide Financial Services Inc. has agreed to pay $7.2 million to state insurance departments and to change how it handles life insurance death benefits.
The settlement is the third agreement state regulators have reached with insurers since a national task force, led by Florida Insurance Commissioner Kevin McCarty, began investigating the industry's practices for paying death benefits. Prudential Insurance Co. of America and MetLife Insurance Cos. signed similar agreements, and John Hancock Life Insurance Co. reached a similar agreement with Florida before the task force was formed.
At issue is the industry's selective use of the Social Security Death Master File database. Regulators say insurers used the database to identify annuity holders who had died so the companies could promptly cut off payments, but did not use the database proactively to identify life insurance holders who had died.
Usually beneficiaries file life insurance claims after their loved ones have died, but in a small percentage of cases, the insured's family doesn't know about the policy and therefore doesn't file a claim.
Insurers that have signed the multistate agreements have committed to build systems to run the Death Master file against their records periodically and to conduct a thorough search for beneficiaries when they identify that an insured person has died. The companies must either promptly pay the beneficiaries or pay the state unclaimed property departments.
Since the multistate investigation began, Nationwide has identified 4,747 unclaimed death benefits, and has already paid $144.1 million to beneficiaries, according to the Florida Office of Insurance Regulation.
The latest agreement with Nationwide is part of a negotiated settlement with regulators in California, Florida, Illinois, New Hampshire, North Dakota, Pennsylvania and Ohio. It will become effective when 14 additional state insurance departments sign.