Kentucky has become the 20th state or jurisdiction to sign the multi-agency, multi-state life claims settlement agreement with Prudential Insurance Company of America and its affiliates, meaning the agreement for Prudential to pay a national $17 million settlement payment is now effective.
News of the agreement was first announced by the Florida and California departments of insurance on Feb. 2.
“I am encouraged by the fact that other state regulatory officials have quickly added their signatures to make the agreement official,” said NAIC President and Florida Office of Insurance Regulation Insurance Commissioner Kevin McCarty. “Fully implementing this agreement will help safeguard Florida’s policyholders and their beneficiaries.”
Florida was one of seven lead investigatory states to initially sign the agreement. The signatures from an additional 13 regulatory jurisdictions were required to make the agreement effective. The lead investigatory states were Florida, California, Illinois, Pennsylvania, New Hampshire, New Jersey and North Dakota.
All states have until March 31, 2012 to sign the agreement to become eligible to receive the distribution of the settlement payment.
The agreement involved the industry’s use of the Social Security Administration’s Death Master List. Insurers are required to investigate claims and to turn over unclaimed funds to the unclaimed property bureau. The Master List is a database of deceased persons in the United States maintained by the Social Security Administration and rented to life insurers.
At issue was Prudential's use of the Social Security Administration's Death Master File, a database listing the recently deceased. Insurers routinely rent the data from the DMF to determine if policyholders or annuitants have died. The charges against Prudential were that the company made asymmetrical use of this resource: checking policyholders against the DMF aggressively when determining whether it was time to stop paying out on annuities, versus a less urgent check against the DMF to determine whether life insurance policyholders had a claims payment coming.
The national $17 million settlement with Prudential will be divided among all participating regulatory jurisdictions. The final distribution amounts for each regulatory jurisdiction will be determined after March 31; however, Florida expects to receive in excess of $1 million to be distributed equally among the Office of Insurance Regulation, the Department of Financial Services (DFS), and the Attorney General’s (AG) office, it stated.
The additional 13 regulatory jurisdictions to sign the agreement to date include Alabama, Arizona, Connecticut, Delaware, District of Columbia, Guam, Idaho, Kansas, Kentucky, Louisiana, Maine, Mississippi, and Oklahoma.
In early 2011, the NAIC formed the Investigation of Life/Annuities Claim Settlement Practices Task Force (chaired by McCarty) to guide the multistate examination process.
In May 2011, public hearings were conducted on this issue in Florida and California. John Hancock Life Insurance Company reached a similar agreement with Florida in May 2011.