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Multi-state life insurance settlement could help connect lost policies to beneficiaries

Life insurance beneficiaries -- many of whom are unaware that they are even owed money from policies -- could collect more than $600 million from insurer MetLife as a result of a multistate settlement that includes Florida and California, as well as several other states.

"This is a landmark," said Florida Insurance Commissioner Kevin McCarty, who spearheaded the investigation. "This is one of the largest returns to consumers we've ever seen."

As part of the agreement, MetLife will make greater effort to locate policyholders and their beneficiaries within 120 days of an insured's death, or pay the benefit to a state's unclaimed-property department if it cannot locate the beneficiary or the insured within a year. It will also search for beneficiaries of the "industrial life insurance" policies the company used to sell.

life insurance settlementMcCarty started his investigation last year when he discovered that MetLife, along with other insurers, used a Social Security database called the Death Master File to determine when holders of annuities died so insurers could end annuity payments. But McCarty also found that the insurers often didn't use that same database to match up deceased life insurance policyholders with their beneficiaries so that beneficiaries could be paid.

The MetLife settlement follows a similar agreement already in effect with Prudential. (MetLife and Prudential are the first and second largest life insurers in the U.S., respectively.) There are currently eight similar investigations under way of 40 other insurance companies comprising more than 92 percent of the life insurance industry, according to the Florida Office of Insurance Regulation.

Rapid response

MetLife paid $40 million to multiple state insurance departments as part of the settlement, and acknowledged that it owes at least $438 million for policies it sold door-to-door going back to the early 1900s. The insurer said it would try to connect with these policyholders, many of whom are at least 90 years old. It won't be easy, because Social Security numbers weren't usually recorded on the policies years ago. The sale of these types of policies ended in 1963.

McCarty said he expects that MetLife owes at least $100 million more to recent customers for "lost" policies. The insurer has set up an online system to help customers and beneficiaries find their policies. MetLife also said it has enough cash reserves to handle the payouts.

A concurrent investigation by New York has resulted in nearly 33,000 payouts of $262 million, according to an announcement Gov. Andrew Cuomo. New York state has set up a Lost Policy Finder to help its residents locate missing life insurance policies and annuity contracts, he said. Cuomo also said that some insurance payouts were substantial, including a $345,000 payment to a Northport, N.Y., beneficiary and a $217,000 payout to a Rockville Center, N.Y., beneficiary.

State coffers also benefit

McCarty said that Florida and the other states could have taken MetLife to court, but that a settlement was more beneficial. "I don't think we could have gotten more," he argued. MetLife will also be monitored for three years and will have to review the Death Master File monthly to make sure it is matching up deceased policyholders with beneficiaries.

If beneficiaries for the unclaimed policies cannot be located within a year, MetLife must turn the money over to the policyholder's state's unclaimed-property department.

Lost and found

But the Social Security Administration (SSA) has created a roadblock in the way of insurers that want to find out if policyholders have died. The SSA has limited the number of deaths it will make public, apparently due to the potential for fraud.

A new LexisNexis service for insurers will match state lists of deceased with life insurance policyholders.

If you know you're due money, don't wait for an insurer to find you. Here are tips to find lost life insurance policies.

More from Ed Leefeldt here

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