Filed Under:Your Practice, Regulatory

NAIC to wrestle with unclaimed property guidance

The National Association of Insurance Commissioners (NAIC) has agreed to consider whether to shift gears on its handling of unclaimed property enforcement issues and provide guidance aimed at ensuring what the industry calls “fair and uniform” settlement practices.

On Dec. 4, the Life Insurance and Annuities (A) Committee approved a resolution to undertake a study to determine if recommendations should be made to address unclaimed death benefits, presumably through guidance to insurers and state regulators.

It was made as a multi-state settlement over unclaimed property practices was reached with Lincoln National Group, Philadelphia, Pa. Lincoln agreed to pay a total $12.6 million to the six states that headed the multi-state task force as well as other states that agree to sign on, according to Melissa Fox, deputy press secretary for the Pennsylvania Insurance Department, the lead state in the investigation. 

It also agreed to revise a number of business practice reforms, including using the Social Security Death Master File database to search its records for deceased life insurance policyholders so beneficiaries may be paid.

California insurance commissioner Dave Jones said Lincoln National holds roughly 4 percent of the national life insurance market, with over $21 billion in annual premiums. He said that with this latest settlement, life insurers representing over 55 percent of the total national market have conformed or agreed to reform their business practices and use the Death Master File to search for deceased policyholders and make benefit payments.

Michael Arcaro, Lincoln Financial vice president and head of corporate communications, said in reaction to the settlement that, “Paying our policyholders' life insurance claims is of the utmost importance to us.”

Arcaro added, “We believe that the practice of checking the Social Security Administration's Death Master File as part of our efforts to identify potential life insurance claims -- while not required previously by law in most states and not standard practice within the industry -- is an improvement in our business practices, and one that we already started phasing in earlier this year.”

He also said that Lincoln cooperated fully with each aspect of the examination.

“While we disagreed with the departments' assertions about what was required by law, we thought that certainty was important and warranted settlement,” Arcaro said. “We are pleased to put this matter behind us and, most importantly, to be taking steps to better serve our customers.” 

The decision to take up the issue by the NAIC ends a rift between supporters of the current policy of having outside vendors examine all insurer policyholder records, then impose fines and requirements for change in business practices, and those regulators who believe it is time to end that, and instead develop a model law setting policy that insurers could use to deal with the issue going forward.

The American Council of Life Insurers strongly supported the NAIC decision.

“The ACLI continues to believe it is in everyone’s best interest -- regulators, consumers and insurers -- to have clear and consistent laws from state-to-state specifying an insurer’s obligations to its customers when an insured’s death has occurred but a claim has not been filed, along with the protocols for escheating unclaimed benefits to the state,” said Whit Cornman, an ACLI spokesman.

Sutherland, Asbill & Brennan included in a note to clients on the NAIC winter meeting that the motion to adopt the charge was based on a motion by Iowa commissioner Nick Gerhart and by Nebraska commissioner Bruce R. Ramge. It was opposed by Florida commissioner Kevin McCarty.

Sutherland added in the note that at the winter meeting, the life committee received an update on the provision of the budget bill approved Wednesday by the U.S. Senate that would restrict access to the Social Security Death Master File for three years from the date of death, except to persons who are certified under a program to be established by the Secretary of Commerce.

The Sutherland letter said that under the provision, only those who have a fraud protection interest or other legitimate need for the information and agree to maintain the information under safeguards similar to those of Federal agencies under Section 6103(p)(4) of title 26 of the United States Code, may apply for certification. The NAIC expects to weigh in on the certification process as appropriate, Sutherland said. 

The letter also said that during the meeting, representatives from the National Conference of Insurance Legislators (NCOIL) urged the NAIC to review and consider NCOIL’s Unclaimed Life Insurance Benefits Act if and when the NAIC drafts its model unclaimed insurance benefits law.

Sutherland said that NCOIL’s representatives also noted that they expect between seven and 15 states to introduce legislation based on the NCOIL Unclaimed Life Insurance Benefits Act in the next 90 days. Eight states have already adopted unclaimed insurance benefits legislation based on NCOIL’s model, the Sutherland letter said.   

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