The Insurance Department
In a press release from New York State Insurance Department, life insurers licensed to operate in the state of New York have been requested to report the number of unpaid death benefit cases that they are handling. This directive was as a result of the New York Insurance Department findings which showed that most life insurers had not been using the official government list of deaths in identifying deceased policyholders. The law compels Insurers to make use of reliable data to find out the mature but unpaid death benefits which were triggered by the demise of the policy holder. But as it stands, the requirement is yet to become permanent, however, the Insurance Department is working on modalities that will ensure the directive is permanent.
Most insurers get information regarding the death of a policyholder from the US Social Security Administration’s records Death master File. This file contains very accurate and up-to-date data so insurers can stop annuity payments almost immediately a policyholder passes on. However, even with a variety of accurate social security records to refer to such as retained assets accounts and annuity contracts, most insurers tend to shun these records which would assist them to know if death benefits are owed and when they are due to be paid to the beneficiaries. The law seeks to compel insurers to make use of these records and to also report their progress in tracking down and paying the beneficiaries.
All 172 life Insurers and fraternal benefit societies legally operating in the State of New York will have to comply with this directive starting September 2011. The exercise will continue for the next six months during which period the Department will expect the firms to report their progress in making use of the relevant records to work out the payments owed to beneficiaries, tracing the beneficiaries, and paying them what is owed to them.
All the 172 firms mentioned above received a formal request, known as 308 letter, which compels them to provide the information. In essence, what is the Department is trying to do is to make sure that insurers pay beneficiaries what is owed to them in a more efficient manner. The reports provided by the insurers will be audited by the firm.
In introduction of the law is an attempt by the Department to ensure that the beneficiaries receive the death benefits even if no one files for them. In the past, they have been instances where failure to file a claim for death benefit has resulted in the insurer deducting premiums from the account value until it is depleted. Another scenario which the Department is trying to avoid, is where an asset which is supposed to be passed on to a beneficiary is not passed on and remains in the custody of the insurer who goes utilizes the funds instead of giving them to the right owner.