Florida Bill Would Force Life Insurers To Find Beneficiaries
Feb. 23--Florida's top insurance watchdogs are urging the state legislature to stop what they call a disturbing practice by life insurance companies.
The state Senate is expected to debate a bill Tuesday aimed at preventing life insurers from holding onto money they owe beneficiaries because they didn't know a policyholder died, and no beneficiary came forward.
When no beneficiary can be found, the state wants those unclaimed funds turned over to the Bureau of Unclaimed Property.
Far more than $100 million is at stake, officials say.
"We've discovered a systematic practice within the life insurance industry in which many companies are sitting on billions of dollars in overdue, unpaid life insurance benefits," Jeff Atwater, the state's chief financial officer, wrote in an essay sent to newspapers last week. "Why? Their excuses are endless, but it boils down to greed."
Insurers collect interest on money that "remains inside company vaults" and not paid to beneficiaries, Atwater wrote.
The proposed law would require insurance companies to compare their list of policyholders with names on the Social Security Administration's Death Master List at least once a year. When matches are verified, companies would be required to search for beneficiaries.
If no beneficiary can be found within five years after death is verified, the money would be turned over to the state and posted on its list of unclaimed property for beneficiaries to search later.
The Senate version of the bill, filed by Lizbeth Benacquisto, R-Fort Myers, has been approved by three committees and comes up for discussion by the full chamber Tuesday.
Benacquisto said Monday that she's "very optimistic" the bills will be enacted. "This is really, really good for constituents," she said. "It's one of the most pro-consumer bills we'll see in the legislature this year. The right thing is for the money to be paid. These people paid their policy dues month after month for their entire lives."
The House version has one more committee stop, and its sponsor, Rep. Bill Hager R-Delray Beach, expects that to happen on Thursday.
Hager said Atwater asked him to sponsor the bill. Hager added, "Because some companies may not be actively seeking those beneficiaries, I considered it a bill that would protect consumers, many of whom should have been paid long ago."
The Social Security Administration's Death Master File contains information collected from many sources, including financial institutions, funeral homes, postal authorities, states, federal agencies and family members. Many insurance companies use the list to identify dead people so they can stop paying annuities -- fixed sums of money typically paid until someone dies -- but not to search for beneficiaries of life insurance policies, a legislative staff analysis noted.
Since 2011, Florida has entered into settlement agreements with 20 life insurance companies, often in conjunction with other states. The settlements uncovered more than 141,000 policies belonging to Floridians and recovered nearly $500 million, Atwater said. About $400 million of that has gone to beneficiaries.
As of January 2016, nearly $172 million has been remitted to the unclaimed property program and of that amount, the state has already returned nearly $51 million of that back to the intended beneficiary or their heir, according to the Department of Financial Services.
If money goes unclaimed from the state for three years, it goes into the Florida Education Trust Fund but remains available to be claimed by the rightful owner in perpetuity, Benacquisto said.
Nationwide, $8 billion has been recovered, and more than $5 billion has been returned to beneficiaries. More than $2.4 billion has gone to the states.
Nineteen other states have passed laws requiring life insurers to search death records for policyholders, but Florida's law would be one of just a few that would be applied retroactively -- back to 1992 -- "because we feel strongly that beneficiaries who were owed years go should still be made whole," Atwater spokeswoman Ashley Carr said in an email Monday.
In his essay, Atwater noted that "some within the insurance industry disagree and have poured a lot of money into lobbying to stop our efforts."
Bruce Ferguson, senior vice president of state relations for the American Council of Life Insurers, said his organization supports laws that require companies to search the Social Security Death Master File. "If a company finds a policyholder has died but no claim has been made, they would then reach out to the beneficiary."
But provisions of the bill would work "to the benefit of the state treasury, not the beneficiary," he said.
For example, he said, the law would require insurers to turn over benefits to the state five years after the date of the policyholder's death, regardless of when the death is discovered, he said. The five years might have actually expired by the time the insurer discovers the death, which "changes the life insurance contract in a manner that is anti-consumer and puts the interest of the state ahead of the beneficiaries."
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