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Hide and seek: Why there's no national database of life insurance policies
There's an old Irish blessing that says, "May you be in heaven a full half hour before the devil knows you're dead." But even if the devil doesn't know, the government does, as do insurance companies, credit card issuers and mortgage lenders. In fact, anyone who can pay for a Social Security Administration service called the Death Master file knows who is no longer living.
For those who fiercely guard their privacy, it's amazing how much people can learn about you after you've died. They can find out your Social Security number, birth date and last known address, just to name a few facts. The Death Master database includes information on more than 89 million deaths, according to The National Technical Information Service.
What can Death Master do for you?
Death Master is an invaluable resource for the Social Security Administration, which updates the file because it doesn't want to keep sending checks to people who are deceased. Employers, credit report companies and banks don't want people using phony Social Security numbers to claim benefits, take out loans or apply for credit cards. Genealogists, who track people's ancestry, have found it to be a treasure trove. And life insurance companies have their own reasons for both using it -- as well as not using, it.
Insurers monitor the database to avoid unnecessary annuity payments − stipends paid to people, usually seniors, who've paid into an annuity to receive monthly income for life. And when that life ends, the annuity payments stop.
But according to Florida Insurance Commissioner Kevin McCarty, life insurance companies haven't been nearly as diligent in using the Death Master for making payments to the beneficiaries of those who have died. By checking the Death Master file against their own policies, life insurers would know when those payments are due and to whom. That hasn't happened, he says, and McCarty wants to know why. Read more about why your life insurance company doesn’t care if you’re dead.
Lost and never found
Many Insure.com readers are equally curious. "My brother died and I have no way of trying to find the policy," wrote a typical reader. "I'm the beneficiary and I think someone has it and is not trying to let me know."
It's unclear how much money beneficiaries should get, but don’t. "[Our] examination … is complicated by the lack of victims that have come forth," says Jack McDermott, director of communications for Florida's insurance department. "Many of these potential beneficiaries are completely unaware that a life insurance policy was in force and unaware that they are entitled to these funds."
Need for national life insurance database
So why don't life insurers join together and establish a national database to make it easier for beneficiaries to find out who owes them money from life insurance policies?
Insurers don't want to answer that question now, since they are about to appear at hearings in Florida, California and other states to discuss why they don’t make efforts to find beneficiaries. Their position, as expressed by the American Council of Life Insurers (ACLI): They've done nothing wrong.
"For over 200 years, life insurers have kept their promises to policyholders and beneficiaries," says ACLI spokesperson Whit Cornman. "This commitment is the basis of every company's business model."
Legally, Cornman may be correct. Life insurance companies pay claims when beneficiaries step forward. Ethically, the fact that insurers use the Death Master database to stop payments on annuities, but not to pay the beneficiaries of life policies, weighs heavily against them, say state regulators.
Could the life insurance industry create its own database for finding lost policies? Industry insiders privately argue that risks may outweigh rewards. Insurers warn that putting together a list of the names of policyholders, beneficiaries and amounts owed could lead to scams, fraud, deception and even murder, leaving insurers vulnerable to lawsuits in each instance. But criminals who access the Death Master database already have a good portion of that information.
Finding a life insurance policy
Those who want to find out if they are life insurance beneficiaries have limited options. They can go to MIB Group, which searches for life insurance applications made. It costs $75 to use its Policy Locator Service. But MIB marketing director David Aronson admits that the service has its limitations and can only tell you if an MIB member company took a policy application within the last 14 years.
"Unfortunately it is not comprehensive enough, nor does it point to whether a policy exists and is in force," says Aronson. "In terms of finding out if someone has passed away, I would think the Social Security Administration is your best bet."
Michael Hartmann's FindYourPolicy.com is another service which tries to solve the problem of life insurance policies gone missing. Hartmann offers anyone with a life insurance policy the opportunity to enter it into a database, which beneficiaries can search after a policyholder's death. The search fee is under $10 and requires four digits of the deceased's Social Security number. But Hartmann admits that his service hasn't garnered the attention of life insurers, whose support he needs to make it work.
"Insurers are not proactive," he says.
Here are more tips for finding lost life insurance policies.
More from Ed Leefeldt here