Commerce Department Proposes Death Master File Rule

By Linda Koco
InsuranceNewsNet

At the end of last year — on Dec. 30, in fact—the U.S. Department of Commerce published a proposed rule that spells out how “persons” can become “certified” to access the Death Master File (DMF) information maintained by the Social Security Administration.

If this sounds vaguely familiar, it is because the National Technical Information Service (NTIS) had published an interim final rule  on the subject in March 2014.

Formed under provisions in the Bipartisan Budget Act of 2013, the interim rule — and now the new proposed rule — aims to reduce opportunities for identity theft and the filing of fraudulent tax returns by permitting access to DMF data by those having a ”legitimate” need. The legitimate need would apply to those with fraud prevention interests or a legitimate business purpose (such as life insurers). Access to others would be delayed.

The interim rule drew several public comments, and now NTIS has released its proposed final rulemaking on the subject. 

Among other things, the proposed “Certification Program for Access to the Death Master File” would establish a “Limited Access DMF” process for allowing “certified'' persons to be eligible for access to DMF information on a deceased person within three years of the death. The rule would replace the temporary certification program currently in place. The rule also includes auditing provisions, establishes certification fees, sets penalties for violators and creates an appeals process.

Time to comment is now

The Notice of Proposed Rulemaking came out in the midst of year-end 2014 holidays. Since many people take time off of work during the holidays, many interested parties may not have seen the notice until this week. 

The notice has a number of areas where NTIS is requesting comment. If anyone wants to respond, they had better move fast. The comment period closes on Jan. 29.

Public access to DMF information is important to at least three sectors outside of the federal government. These are:

• The insurance regulatory and underwriting community. State insurance regulators want life and annuity carriers to check in with the DMF regularly, to ensure that the carriers identify beneficiaries that are due policy proceeds in a timely manner. Carriers that are seeking to abide with evolving laws, regulations and regulatory judgments in this area want this too.
• The privacy and cyber theft sector. This fast developing field wants to ensure that access to this information is not open to all. This is due to concerns about potential identity theft of now-deceased persons whose Social Security numbers might be obtained in such searches. According to the Internal Revenue Service website, thieves steal the identities of nearly 2.5 million deceased Americans each year. (Page reviewed as of Oct. 23, 2014.) Since identity theft works to cross-purposes with insurance, the insurance sector understands this concern even as it favors having authorized insurance people gain secure access to the information.
• The genealogy community. This sector wants to ensure that those researching family histories and doing various types of archival and historical research have access to the DMF in order to pursue their various research projects.

The outcome of the proposed rule holds interest for life and annuity insurance practitioners for two key reasons.

First, to the extent that insurance interests obtain the DMF access they need in a timely matter, this should ease state regulatory concerns and make for better outcomes overall. That will help settle the dust over unclaimed life insurance benefits that made headlines in recent years — a positive for customers and for those who interact with customers.

Second, assuming the final rule will indeed deter identity theft of deceased persons, this will be a point of reassurance for clients who have had a death in the family. As sad as it may be, it is no longer uncommon for people who settle the affairs of a loved one to start receiving warnings about this type of identity theft risk. If clients ask their insurance professional about this, the advisor will be in a position to respond in a meaningful way.

DMF requirements on insurers

According to the American Council of Life Insurers (ACLI), in April 2014,there were 11 states that had already enacted statutes requiring insurers to use the DMF, or similar comprehensive database, to search their insurance records to determine whether life insurance benefits may be payable.

At least eight other states had similar legislation that was pending signature or under consideration, wrote Roberta Meyer, vice president and associate general counsel at ACLI, in a comment letter to NTIS at the time.

In addition, 13 insurance companies had entered regulatory settlements with state officials from 30 states requiring the insurers to use the DMF or a comparable database to identify matches for possible unclaimed benefits or to allow a state auditor to compare the company’s records against the DMF, Meyer said.

“These settlement agreements impose requirements to attempt to confirm death, locate the beneficiary and provide the beneficiary with claim forms that are similar to the requirements under the state laws described above,” she noted.

Linda Koco, MBA, is editor-at-large for InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda may be reached at [email protected].

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].