Florida is one of seven states to sign a settlement with Prudential Financial in a death benefits dispute. The multi-state investigation into the insurance industry's treatment of unpaid life insurance benefits began last May. The settlement requires Prudential, the second-largest life insurer in the country, to institute procedural changes and to pay $17 million to the states to fund compliance monitoring.
This is just the first of many such settlements expected in the matter. The investigation targeted half a dozen companies and their handling of unclaimed life insurance benefits. The controversy stems from claims that companies did not do enough to locate beneficiaries and then held on to the funds, instead of turning them over to the state.
The Social Security Administration maintains a "death master file" that contains information about individuals whose deaths are reported to the agency. More than 83 million records were available to insurance companies in 2009, for example, yet state officials believe that companies conducted only cursory searches on an irregular basis.
As part of the settlement, Prudential agrees to check the death master file regularly for death information of any life insurance policyholders or annuities owners. The company will also use more sophisticated search techniques, such as revamping its name matching criteria to look for transposed letters; expanded searches should result in more "hits" against the death master list.
The insurer also agrees to use "all other means available" to ensure that beneficiaries receive what is owed them as soon as possible after the policyholder's death. And, the company must follow the law and turn over unclaimed benefits to the states.
Although seven states have signed the settlement agreement, it will not be final until 20 more states sign.
Source: Reuters, "Prudential reaches multi-state settlement over death benefits," Jack Welch and Suzy Welch, Feb. 3, 2012