The Florida Office of Insurance Regulation (Office) along with the Department of Financial Services (DFS) and the Office of the Attorney General (AG) today announced a multi-million dollar settlement agreement with Prudential Insurance Company of America and its affiliates (Prudential). By entering this agreement, Prudential is taking a leadership role in the industry to invest resources into efforts to locate beneficiaries of life insurance policies after the insured has died, but a claim has not been received.
Life insurance companies can find out that an insured has died by comparing policyholder records to the Social Security Administration’s Death Master List. Many companies have used this method to stop annuity payments, but have not used the same method to make life insurance payments. For several years, Prudential has used the Death Master List to make life insurance payments when it has found that an annuity holder has died or when it has a precise match to name, social security number, and date of birth. Under this agreement, Prudential has committed to building a system to match inexact data, to search for beneficiaries if they find a match, and to do these matches more often.
As part of the agreement, Prudential agreed to:
- Overhaul its computer system and revise its business practices to better utilize the Death Master File to identify life insurance beneficiaries.
- Pay a national $17 million settlement payment.
- Return monies promptly to beneficiaries when located through revised search efforts.
- If a beneficiary cannot be identified, the amount due will be reported to the Unclaimed Property Bureau of the Florida DFS or the appropriate state unclaimed property office in accordance with state laws.
- Provide quarterly reports for the next three years to the Office, DFS and the AG with updates on information specific to Prudential’s implementation of the agreement.
The lead investigatory states were California, Florida, Illinois, Pennsylvania, New Hampshire, New Jersey, and North Dakota, and these states have all signed the agreement. For the agreement to become effective, a total of at least 20 states need to sign. All states have until March 31, 2012 to sign the agreement to become eligible to receive the distribution of the settlement payment.
The national agreement was signed by the lead investigatory states and will involve a payment of $17 million for examination, compliance, and monitoring costs. Under the current distribution formula based on life insurance and annuity market share – Florida anticipates receiving at least 5 percent of this settlement to be divided equally between the Office, DFS, and the AG.
“I appreciate the cooperation of Prudential’s senior officers and regulatory compliance professionals for their work to help regulators identify beneficiaries, and to take steps proactively to implement procedures to more effectively pay claims and remit funds to the Division of Unclaimed Property,” said Insurance Commissioner Kevin McCarty. “Based on hearings conducted in May 2011, we know that the failure to search for beneficiaries even though the company has access to death information is a pervasive industry practice. The Office will move vigorously to ensure that other companies also revise their business practices to ensure beneficiaries are given all the life insurance proceeds to which they are entitled.”
“As a public official, I have a deep responsibility to ensure that companies doing business in our state are playing by the rules and honoring the contractual obligations they have made with their customers,” said Chief Financial Officer Jeff Atwater who oversees the Department of Financial Services. “As such, this landmark settlement with Prudential will make certain that Floridians get the dollars they are owed plus interest earned for the time the insurer held the payment. It will also require the company to improve its policies to protect policyholders from being systematically defrauded out of the dollars they’ve set aside to prepare for the loss of a loved one.”
"Life insurance companies should devote the resources necessary to find beneficiaries and make payments in a timely manner, and this settlement is one more advance in changing industry practices to protect rightful beneficiaries," stated Attorney General Pam Bondi with the Florida Office of the Attorney General.
In early 2011, the National Association of Insurance Commissioners (NAIC) formed the Investigation of Life/Annuities Claim Settlement Practices Task Force (chaired by Commissioner McCarty) to guide and coordinate the multistate examination process, and conducted public hearings in Florida and California in May 2011 on this issue. John Hancock Life Insurance Company reached a similar agreement with the Office, DFS and the AG in May 2011.
Consumers can access more information about either the Prudential or John Hancock settlement agreements by accessing the DFS Division of Consumer Service web page here or the Office’s web page on the Life Claims Settlement Issue.