Florida Law Forces Life Insurers To Find Beneficiaries

April 23--Donna Delzingaro's father died in 1990, but it wasn't until decades later that she got a call from the state informing her that she and her sisters each had nearly $44,000 coming to them from a life-insurance policy on her dad.

"We were shocked," said Delzingaro of Ormond Beach, who received the money in 2013. "My parents never told me there was a policy. I think they forgot about it themselves."

Delzingaro is one of thousands of Floridians who have received a combined $362 million since a multistate probe found life-insurance companies were sitting on billions of dollars that should have gone to beneficiaries. About $122 million more awaits disbursement to beneficiaries who haven't been located.

More forgotten heirs could soon see a windfall. A bill signed into law this month by Gov. Rick Scott will force companies to try to track down beneficiaries within 120 days of learning of a death. It also will require companies to search a Social Security database at least once a year to see whether their policyholders have died.

"There's a lot of unclaimed money out there that people don't even know is theirs," said Barbara Smith, 63, of Maitland, one of Delzingaro's sisters. "It shouldn't be up to the state to track down people. The people who owe the money should pay out what's due."

In some cases, the companies continued to pay themselves premiums by draining the cash value of whole-life policies before finally canceling them, bill sponsor Rep. Bill Hager, R-Delray Beach, testified before a House committee in February.

"Many life-insurance companies built in business practices that intentionally shielded them from knowledge of a policyholder's death, a practice which drastically reduces the number of policies that are properly -- and timely -- paid out," Chief Financial Officer Jeff Atwater said.

Under the new law, companies that can't locate beneficiaries must turn the money over to Florida's unclaimed-property division, which will continue the search.

Industry lobbyists have maintained that it's the beneficiaries' responsibility to file claims.

However, the American Council of Life Insurers last week called for all states to adopt by the end of next year a national standard that would require a search of the death database. The council's proposed legislation is narrower in scope than both Florida's and a model drawn up by a consortium of states.

"Life insurers want everyone to receive the benefits to which they are entitled rather than paying unpaid benefits to state governments," the organization said in a statement, adding that more than $600 billion has been paid to beneficiaries in the past decade. "In a small percentage of cases, life insurance benefits go unclaimed because family members are unaware that they are listed as beneficiaries in existing policies."

A multistate task force began investigating in 2011 after the founders of a Connecticut-based auditing firm, Verus Financial, discovered the problem. Since then, 20 states have passed legislation to curb the abuses. Florida's new law, which requires insurers to retroactively check death records to Jan. 1, 1992, is the most stringent, state insurance officials said.

Florida Insurance Commissioner Kevin McCarty was chairman of the task force, with insurance officials from California, New Hampshire, North Dakota and Pennsylvania also on the panel.

Twenty of the nation's top 40 insurance companies by market share, including major players such as MetLife, Prudential, New York Life, John Hancock and Nationwide, have agreed to pay a combined $7.4 billion in death benefits. Additional companies remain under investigation or in negotiations.

Steven Weisbart, senior vice president and chief economist at the Insurance Information Institute, an industry group, said companies did not willfully withhold payouts. Rather, he said, people are living so long that it has become possible to buy a life-insurance policy and forget about it decades later. He also said it's important for policyholders to inform their beneficiaries.

"I flatly reject the idea that this is part of a deliberate scheme that insurance companies have adopted in order to profit from holding onto the money," Weisbart said. "One of the problems is families don't talk about money. It's one of those forbidden subjects."

Weisbart also said it will burden small companies to perform the searches retroactively and could damage them financially.

But beneficiaries who have received money they did not know they were owed have a different perspective.

Kyle Haskins, 20, an Oviedo High School graduate who goes to college in Ohio, in February received nearly $74,000 that his grandmother, who died in 2002, had left him as beneficiary of her life-insurance policy. He split the cash with his 18-year-old brother, and they donated $10,000 to St. Jude's Children's Research Hospital, he said.

"I'm not mad at anybody," Haskins said. "I understand how the insurance business works. I just don't think it's the most moral of situations."

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Beneficiary checklist

Contact the Florida Division of Unclaimed Property at 888-258-2253 or [email protected].

Look through files, safe-deposit boxes and other storage places to find insurance documents.

Check address books for the names of insurance agents or companies.

Contact attorneys, accountants, investment advisers, bankers or insurance brokers who advised the deceased.

Contact the deceased's previous employers for records of group policies.

Check bank statements for checks to insurance companies.

Check the mail for a year after a death for premium or dividend notices.

Review the deceased person's income-tax returns for the past two years for interest income and loans related to life insurance.

To avoid the problem, talk to your beneficiaries and encourage your loved ones to disclose theirs.

Source: Insurance Information Institute

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