Massachusetts Reaches Landmark Life Insurance Settlement Agreement with Prudential
Past Experience Indicates that Tens of Millions of Dollars Will Flow to Intended Beneficiaries
Treasurer Steven Grossman today announced that Massachusetts, along with 19 other states, has reached an agreement with The Prudential Group, one of the nation’s largest life insurance companies, regarding industry-wide practices that resulted in failure to pay certain death benefits to rightful beneficiaries.
“Our primary goal is to ensure that every individual in Massachusetts who is entitled to these benefits receives them in a timely and appropriate manner,” said Grossman. “Prudential deserves credit for working with us to advance this goal, and this resolution will undoubtedly result in improved insurer accountability and business practices in Massachusetts and across the country.”
The Prudential agreement, which requires the company to better cross-reference its policy database with public death records, arises 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 on 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.
“Because of this audit, thousands of Massachusetts beneficiaries or their heirs will receive millions of dollars in unclaimed death benefits, paid either directly from Prudential or through the efforts of the Treasury’s Unclaimed Property Division,” said Grossman. “This agreement shores up the trust that those who have passed placed in their insurance company, and it ensures that policy proceeds will go to their intended use.”
The Prudential agreement is the second of such settlements signed since Grossman took office. In March of last year, Grossman entered into a similar agreement with John Hancock Life Insurance Company following an audit of its life insurance policy practices. That effort has already resulted in the Commonwealth taking custody of over $20 million in policy proceeds, an amount that will grow as Hancock continues to cross-reference its policy database with public death records. Grossman’s office will be working in the coming months to help reunite these proceeds with their rightful owners.
The Prudential and John Hancock agreements represent significant milestones in the Commonwealth’s multi-year effort to audit the U.S. life insurance industry for withheld funds and unclaimed property. Many other of the country’s largest life insurance companies are also under similar audits, and it is expected that this latest agreement will serve as a further example for the rest of the life insurance industry to follow.
In addition to the unclaimed property identified by these audits, the Treasury also maintains a comprehensive list of approximately $2 billion in unclaimed monetary property, such as stocks, un-cashed checks, refunds, and bank accounts. Individuals can search to see if they own such property at www.findmassmoney.com or by calling (888)344-MASS.