Post Date February 20, 2012 - Twenty U.S. States have come to an agreement with Prudential Insurance Company in a case which challenges the way the insurance carrier handles unclaimed funds for life insurance and other policies excluding car insurance. Prudential insurance is one of the leading providers for life insurance coverage in the United States. In a statement issued by a Massachusetts Department of Insurance, the settlement over the case will compel the insurance company to verify its policy holdings against public records databases such as the Social Security Administration and others, in an effort to guarantee payment of death benefits to eligible recipients in a more controlled and efficient manner. While the settlement does not have a penalty or any settlement amount due, the courts have compelled the carrier to increase its transparency and best practices in every state across the nation. Prudential is not the first insurance company to come under scrutiny for unpaid coverage practices. After an audit of John Hancock insurance company, they relinquished over twenty million dollars in profit from policies. This number is expected to rise as audit proceedings continue. The state will then distribute the funds to those legally entitled to a death benefit. The audits are being conducted to ensure compliance with state laws concerning abandoned property. Every year, money is abandoned in Bank accounts, Safety Deposit Boxes and Insurance Policies. Under normal circumstances banks and insurance companies should turn over these assets to the state of the owners residence.
The problem of failure to pay insurance policy benefits to beneficiaries is apparently widespread. As opposed to the approved practice of paying out death benefits to the proper estate or individual, the company would sap the remaining cash reserves to continue collection of coverage costs and fees after the covered individual had passed. At the end of the draw-down of funds or cash value, the policy would be closed. This occurred even in cases where the insurer had actual notice of the passing of an insured party. States will work with companies to decide the rightful place for funds depleted in this manner. In most cases Car insurance Polices would not pose this problem.
A similar situation happened to both me personally and our company. A number of years ago we were approached by a representative of Citizens Bank to open a business line of credit. The representative stated we would need to open a few bank accounts with Citizens if we were to receive the credit line requested. We complied and opened a number of business accounts and a personal account for my wife and myself. We deposited $100.00 in each account. Shortly after we opened the accounts, our line of credit was not approved. Although we felt the bank wasted our time, we did not close the accounts immediately. Month after month went by and the accounts remained open. Finally at one point we decided it was time to close the accounts. When I contacted the bank on the procedure of closing the accounts a retrieving our funds, I was told the business accounts had already been closed and our funds had been depleted. I was told a minimum amount had not been maintained and monthly charges depleted our funds and the accounts were closed . I explained the accounts opened did not have a monthly minimum nor a monthly charge. They agreed. I was then advised there was a change in their account policy after our accounts were opened and there was nothing they could do for me. The money was gone. In my opinion Citizens Bank took advantage of us and grabbed hundreds of dollars which didn’t belong to them.
Michael E. Dortch
President & Managing Agent
Corporate Home Office
618 South Broad Street
Lansdale, Pennsylvania 19446
(800) 807-0762 ext. 602