An agreement between Prudential Financial Inc. and multiple states could turn up tens of millions of dollars in life insurance benefits to people who didn't know they were beneficiaries on policies.
Massachusetts and California state officials announced the agreement Jan. 13. The settlement, which also was signed by 17 other states and the District of Columbia, requires Prudential to improve the system for cross-referencing its policy database with public death records so beneficiaries promptly receive the payouts to which they're entitled.
State officials ordered audits of the life insurance industry in 2008 because they were concerned that in some cases, insurers were failing to pay death benefits to beneficiaries promptly or at all if the beneficiaries were unaware the policies existed. In some instances, companies also drew down on a policy's cash reserves to cover premiums after the policyholder died, and then canceled the policy once the reserves were depleted.
"Because of this audit, thousands of Massachusetts beneficiaries or their heirs will receive millions of dollars in unclaimed death benefits, paid either directly from Prudential or through the efforts of the Treasury's Unclaimed Property Division," Massachusetts Treasurer Steven Grossman said in a press statement. "This agreement shores up the trust that those who have passed placed in their insurance company, and it ensures that policy proceeds will go to their intended use."
California, Massachusetts and other states reached a similar agreement with insurance company John Hancock last spring. Many other life insurance companies are under similar audits.
So far, audits have identified more than 1,000 Prudential policies held by individuals in California who have been dead for more than 15 years. California State Controller John Chiang's office said the agreement with Prudential may return up to $20 million to families of deceased life insurance policyholders in his state.
In Massachusetts, the agreement with John Hancock has already turned up more than $20 million in policy proceeds, and the total will continue to grow as the company continues to cross-reference its policy database with public death records, according to Grossman's office.
Other states signing the settlement are Colorado, Idaho, Louisiana, Maine, Maryland, Mississippi, Montana, Nebraska, North Dakota, Oregon, Pennsylvania, South Dakota, Tennessee, Utah, Vermont, Washington and Wisconsin.