RiverSource Life Settles With Regulators on Payouts
Minneapolis-based RiverSource Life InsuranceĀ agreed use the Social Security Administration database to search for beneficiaries who might be owed benefits, California insurance regulators announced.
The $1.5 million settlement with regulators brings to 28 the number of major life insurance companies that have agreed to use SSAās Death Master File to cross-reference Social Security numbers belonging to deceased policyholders.
RiverSource is a subsidiary of Ameriprise Financial.
āAmeriprise has set a great example through the examination process by fully cooperating and agreeing to change their practices to benefit their policyholders,ā said Insurance Commissioner Dave Jones in a news release. āI strongly urge other life insurers to follow Ameriprise's lead."
As part of the settlement, RiverSourceĀ will do aĀ āthorough searchā to locate and contact beneficiaries of policies or annuity contracts after receiving a notice confirming the death of a policy or contact holder.
The $1.5 million settlement represents a relatively small sum as some insurers in the past three years have settled for more than $10 million. Many insurers have settled for between $1 million and $5 million.
Several statesĀ allege that when it came to life insurance payouts, insurers didnāt bother combing through Social Security data to identify deceased policyholders and pay beneficiaries.
Yet when it came to putting a stop to annuity payments upon the death of the annuitant, insurers were quick to check the database, thereby using the databases to their own benefit.
The practice of ignoring the Social Security database when it came to life insurance benefits but using the same database to cut off annuity payments violated state insurance laws, regulators maintain.
Insurers countered that they were under no obligation to pay benefits since in many cases beneficiaries never filed a claim.
Payouts to beneficiaries delayed years or decades let insurers collect billions of dollarsā worth of interest on the invested funds, the states said.
Last year, a Maryland state court ruled thatĀ a Maryland insuranceĀ law requiring insurance companies to check the latest version of a death master file is applicable to in-force policies issued before the law became effective.
So far, life insurers have paid $7.3 billion to insurance beneficiaries nationwide as part of their respective settlements.
California, North Dakota, Florida, New Hampshire and Pennsylvania regulators have led the investigations into the use of the database.
Examiners are still investigating the practices of Northwestern Mutual, Great West, Protective Life, American Equity, State Farm, Aflac, Principle Financial, Allstate, Western Southern, OneAmerica, Ohio National, and American National.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
Ā© Entire contents copyright 2017 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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