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Thursday, October 25, 2012

Making Sure Beneficiaries Get Life Insurance Money

This week, the American International Group became the latest insurance company to settle an inquiry by a group of state insurance regulators into the handling of death benefits, the payments to a beneficiary when the holder of a life insurance policy dies.

A.I.G agreed to pay $11 million to resolve the multistate investigation, joining several other insurers that had already settled, including Nationwide Financial Services, MetLife and Prudential Financial.

The companies have agreed to check their lists of policyholders regularly against the Social Security Administration's “death master file” database and to make “more robust” efforts to locate beneficiaries, according to insurance officials in Pennsylvania, one of the lead states in negotiating the agreement with A.I.G.

Traditionally, insurance companies have required beneficiaries to file claims to receive benefits from life insurance policies. That has meant that claims sometimes are never fi led - perhaps because policy documents were lost, or because beneficiaries did not know a policy existed. But state insurance regulators, for the past two years, have been looking into the practices of large insurers and urging them to proactively identify policies that may be due for a payout.

State regulators have charged that insurers used the Social Security Administration's list of recently deceased people to stop making annuity payments to dead customers, but, at the same time, did not use the list to check whether any life insurance policyholders had died.

In a statement, Pennsylvania authorities said A.I.G. had agreed to use the death master file “on a uniform basis” to find dead policyholders and pay beneficiaries.

The A.I.G. settlement and several others were negotiated with a multistate task force created by the National Association of Insurance Commissioners.

A.I.G. denied any wrongdoing, but agreed to pay the $11 million to resolve disputes with the regulators. In a statement, A.I.G. said it was “taking enhanced measures to, among other things, routinely match policyholder records” with the death master file.

Rosanne Placey, a spokeswoman for the Pennsylvania insurance commissioner, said that the agreement was an important step, but that the best way to avoid problems with life insurance claims is for policyholders to discuss policies with their beneficiaries. Often, the department gets calls seeking help from people who say they think a deceased parent had a life insurance policy, but they are not sure - and don't know how to find it.

“We always tell consumers to inform their beneficiaries of the policies,” she said. A policyholder should keep copies of a policy at an off-site location - such as in a safe deposit box, or with a lawyer or financial adviser - and make sure the beneficiaries know where the documents are kept and how to get access to them.

The American Council of Life Insurers also has tips for finding missing policies.

Have you had to track down a missing life insurance policy after a parent or other relative died? How did you do it?