GROSSMAN ANNOUNCES OVER $24 MILLION RECOVERED FROM LANDMARK SETTLEMENT AGREEMENT WITH LIFE INSURERS IN FY 12
Consumer Protection Measure Directs Life Insurance Payments to Rightful Beneficiaries
Treasurer Steven Grossman today announced that landmark settlement agreements entered into with three leading life insurance companies have resulted in over $24 million being turned over to the Commonwealth in Fiscal Year 2012 to distribute to rightful beneficiaries. The settlements involved industry-wide practices that often resulted in failure to pay death benefits to appropriate parties.
“Our primary goal is to ensure that every beneficiary in Massachusetts who is entitled to benefits receives them in a timely and appropriate manner,” said Grossman. “The insurance companies that are working with us are doing the right thing, and we expect that other insurers will soon follow suit. Simply put, insurers need to be held accountable for their business practices in Massachusetts and across the country.”
To date, John Hancock, Prudential, and MetLife have entered into settlement agreements with the Commonwealth. The agreements arise out of audits that Massachusetts authorized in June of 2008 to review the insurance industry’s compliance with unclaimed property laws.
These audits were conducted based on concerns that insurance companies were - in some cases - failing to pay death benefits to the beneficiaries of life insurance policies in a timely manner or failing to pay them at all if the beneficiaries were unaware of the policies’ existence. In some instances, companies also drew down a policy’s cash reserves to cover ongoing premiums after the death of the policyholder. Once these reserves were depleted, the company canceled the policy.
Under the settlements, the companies have also agreed to change their business practices of waiting for notification by the policy holder’s beneficiaries and receipt of a certified death certificate before paying a death benefit under a policy. Rather, they will now search public records on a quarterly basis to determine if a policy holder has passed away and undertake efforts to locate and pay the beneficiary.
The assets turned over to the state will go to the Treasury’s Unclaimed Property (UCP) Division, which works to connect people with their rightfully owned property. The $24-plus million in funds turned over to the Division last fiscal year represent payments due to approximately 12,000 beneficiaries. To date, the Division has been able to return over $2.4 million of this money and is in the process of returning an additional $1.6 million to beneficiaries that the Division has been able to positively identify. Treasury officials will continue to take proactive steps to identify the rightful owners of these funds.
Grossman said his office is presently negotiating with other large life insurance companies to enter into similar settlement agreements and expects to sign additional agreements in the coming months.