States Audit Benefit Payout Practices By Insurers
Twenty US states have come to an agreement with Prudential in a case that challenged the way the insurance carrier handed unclaimed funds for life insurance and other policies. Prudential is one of the leading providers for life insurance coverage in the United States.
In a statement issued by a Massachusetts official, the settlement over the case will compel the insurer 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 such insurer to come under scrutiny for its unpaid coverage practices. After an audit of John Hancock, the insurer was compelled to relinquish over twenty million dollars in profit from policies to state control. This number is expected to rise as audit proceedings continue, and deceased persons are identified through cross-referencing databases. The state will then distribute the found money to those legally entitled to the death benefit.
There are other insurers with audit records resulting in similar adjustments and repayment, hopefully leading to more payments to those who are entitled to the benefits.
The audits and changes are the result of oversight from twenty states and Washington, D.C., originating in an audit of over twenty firms back in 2008. The audits are being conducted to ensure compliance with state laws concerning abandoned property.
The problem of failure to pay benefits to beneficiaries was 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 after the covered individual had passed. At the end of the draw-down of funds, 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 determine the rightful place for funds depleted in this manner.