Symetra Settles Death Master File Claim

By Arthur D. Postal
InsuranceNewsNet

WASHINGTON – Symetra has become the 15th company to pay a fine and revise its use of the Social Security Death Master File (DFM) in handling death claims.

The settlement was announced by the California Department of Insurance, which conducted a multi-state examination and served as the lead state in the investigation. Other states taking part in the settlement are Florida, Illinois, New Hampshire, North Dakota, Pennsylvania and Washington.

A few weeks ago, the U.S. subsidiaries of companies owned by Sun Life of Canada reached a similar settlement with state insurance regulators.

The actions settle allegations by state insurance regulators that the insurers used the DFM only to pay claims for variable annuities with lifetime payment options when policyholders died, but they did not use the DFM to find beneficiaries of life insurance policies who had not filed claims.

The latest settlements come as state regulators and unclaimed property administrators apparently are turning away from investigations and settlements, and instead focusing on writing legislation that clearly establishes their authority to conduct the settlement.

In announcing the latest settlement, California Insurance Commissioner Dave Jones urged other insurers to follow Symetra’s example for consumers’ benefit.

"Symetra has agreed to do the right thing for consumers by making necessary changes to ensure the proper use of the Death Master database," Jones said. "I urge other life insurers to follow this example by using the Death Master database to identify deceased policyholders and pay benefits to beneficiaries when they are owed."

Jones said Symetra will now compare all company records against the DMF to determine if there are unclaimed death benefits and conduct a thorough search for beneficiaries to whom unclaimed benefits may be owed. The $1.2 million payment will be disbursed among the states that participated in the settlement.

To date, state insurance regulators have either reached settlements or concluded the investigation of 17 of the top 40 companies constituting 60 percent of the total market, said Kevin McCarty, commissioner of the Florida Office of Insurance Regulation. Efforts continue to be focused on the examination of the remaining 24 insurers, McCarty said.

Established in 2011, the multistate examination process is guided and coordinated by NAIC’s Life/Annuities Claim Settlement Practices Task Force, which is chaired by McCarty. This multi-state national project has resulted in the return of more than $1 billion to beneficiaries directly by the companies and over $1.7 billion delivered to the states’ unclaimed property bureaus, which continue efforts to locate and pay beneficiaries.

Mary Jo Hudson, a former Ohio insurance director and a partner at Bailey Cavalieri in Columbus, said that the latest agreements do not change a view expressed at the annual American Council of Life Insurers meeting that a few additional settlements of long-pending market conduct examinations “are possible, but they do not alter my earlier observation.”

“Clearly, the pace of these actions has subsided significantly, and new examinations have not been opened,” she added.

Instead, Hudson said, state regulators are pressing a 2015 plan to develop a model law on unclaimed benefit issues through the National Association of Insurance Commissioners (NAIC) A (Life Insurance) Committee, which discussed the issue at last week’s NAIC meeting in Washington.

The National Council of Insurance Legislators (NCOIL) also has proposed a model law already adopted by 16 states. This law clearly establishes the states’ authority to promptly gain the proceeds of life insurance policies that have not been claimed by beneficiaries. The model law is being amended through NCOIL as part of an effort to establish a national, uniform unclaimed property policy.

Insurance industry lawyers estimate that the settlements have cost the industry more than $1.5 billion. However, the lawyers say, another cost is the fees levied by outside vendors using state police powers to conduct comprehensive audits of life insurers. Three auditing firms are involved, and the audits can cost as much as $3.2 million per insurer, according to lawyers at several firms who serve as outside counsel for insurers.

The latest settlement was accomplished through an NAIC task force established in 2011.

Arthur D. Postal has covered regulatory and legislative issues for more than 30 years in Washington, D.C. He can be reached at [email protected].

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