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Filed Under:Life Insurance, Life Products

Unclaimed Property Issue Better Suited to Federal Level?

Maybe this one might be better suited to a national standard.

I have not been an advocate of federal insurance regulation replacing state insurance regulation, but I have to admit that, in certain instances, federal oversight seems to make sense.

Take the case of the new proposed unclaimed property model law just passed Nov. 20 by the National Conference of Insurance Legislators (NCOIL). The model law seems to add to the confusion revolving around the system that must be used by insurers to comply with the escheat law, which deals with finding beneficiaries of unclaimed property or turning the funds over to the states.

NCOIL is attempting to clarify state laws requiring the use of the Social Security Death Master File (DMF) by life insurers. The swiftly created model law seems to be drafted out of concern that state insurance regulators are not moving aggressively enough on the issue.

Unfortunately, the model law seems to be adding to already widespread confusion on the entire issue. Unclaimed property requirements vary from state to state, and insurers find themselves having to deal with different obligations in different states with no national standard.

As National Underwriter’s Arthur Postal reported in his Nov. 22 article on the unclaimed property issue, officials at the American Council of Life Insurers say problems with the model law remain. They'll seek changes in the proposed model as state legislatures start to deal with the issue in January.

The model law calls for timely insurer efforts to confirm a policyholder’s death, locate any beneficiaries, and provide claim forms and instructions. If benefits go unclaimed, the model law provides clear procedures for life insurers to notify state treasury departments and escheat the funds per unclaimed property laws.

But many states will inevitably have different timelines and required procedures, still leaving insurers the burden of having to comply with many different rules from state to state. Why should the rules for this be different in New York than they are in California? Would one universally accepted federal standard be such a bad idea in this instance?

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Nichole Morford

Nichole Morford
Managing Editor

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