Prudential Insurance Company has reached a settlement with 19 states over its unclaimed property practices.
It also said it is negotiating a similar agreement with other states in which it does business.
Under the agreement, Prudential will revamp its unclaimed property policies, restore the value of impacted accounts or pay the proceeds to beneficiaries.
Interestingly, however, unlike an earlier settlement by state authorities with John Hancock, Prudential will pay no fines.
It has merely agreed to pay the beneficiaries 3% compounded interest on the value of the held amounts from the date of the owner’s death or from Jan. 1, 1995, whichever is later. Prudential will also accelerate turning over unclaimed property to the states, according to a statement by Pru officials.
The settlement was announced by John Chiang, California controller. He said the settlement could “return up to $20 million to the families of deceased life insurance policyholders in California.”
However, based on Chiang’s statement, that would be a steep uphill climb for the results of the probe up to this point.
So far, Chiang said, more than 1,000 Prudential policies have been identified as being held for individuals in California who have been dead for more than 15 years. The average cash value of the policies is about $2,000, Chiang said.
In his statement, Chiang said his office “took the lead” in negotiating the settlement, which 18 other states subsequently joined.
But the Prudential statement, released over the weekend to NU by Robert DeFillippo, its chief communications officer, said the settlement was attained through a multi-state market conduct exam initiated through the National Associaition of Insurance Commissioners (NAIC).
The Florida, California, Pennsylvania, Illinois and New Jersey Departments of Insurance have been taking the lead in negotiating an agreement with Prudential, DeFillippo stated.
Besides California, other signers of this agreement are Colorado, District of Columbia, Idaho, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Montana, Nebraska, North Dakota, Oregon, Pennsylvania, South Dakota, Tennessee, Utah, Vermont, Washington and Wisconsin, Chiang said.
DeFillippo said that, “Prudential looks forward to quickly reaching a parallel agreement concerning insurance claim settlement practices with state insurance regulators.”
Chiang said the settlement was prompted through an audit his office initiated.
He said the audit revealed an “industry-wide practice” of companies failing to pay death benefits to the beneficiaries of life insurance policies.
Instead, Chiang said, companies would draw-down the policies' cash reserves in order to continue collecting premium payments from the deceased.
Chiang said that his audit found that “Once the cash reserves were depleted, the company would cancel the policy.”
He said the audits also found that insurers did not routinely cross-check the owners of dormant accounts with the Social Security Administration's Death Master File and other government databases listing deceased individuals. In other cases, the company had direct knowledge of the death of a policy owner, but still did not notify the beneficiaries.
But DeFillippo said that the company “remains committed to paying the claims of our customers.” DeFillippo also said that Pru has been using the Social Security Death file since 1998.
He said the enhanced standard Prudential has agreed to implement, such as including incomplete or missing social security numbers, transposed letters in first and last names, or transposed digits in dates of birth and social security numbers, “will supplement Prudential’s extensive prior efforts to identify deceased insureds and to locate beneficiaries.”
“Where beneficiaries cannot be found, unclaimed proceeds will be remitted to the state unclaimed property departments on an accelerated basis,” DeFillippo said.