3 Kemper Insurers Sue Illinois

Nov. 03--Three Kemper Corp. life insurance companies have sued the Illinois state treasurer, claiming the office is improperly demanding records to identify families that are owed life insurance money after a death of a family member.

United Insurance Company of America, Reserve National Insurance Company and Reliable Life Insurance Company claim that Illinois Treasurer Michael Frerichs is overstepping his authority. Frerichs has been doing audits of about 40 life insurance companies to determine whether people in Illinois are entitled to money from life insurance policies that have been forgotten after the insured person has died.

Since 2013, Frerichs said, $195 million has been identified for grieving families that often did not know a family member had a life insurance policy.

While 22 companies have provided records related to insurance payments, the three Kemper insurance companies sued to prevent the inquiries, he said. The life insurance industry has been raising issues over audits for years, and a similar case has been ongoing in California.

"The problem is that too many beneficiaries are unaware that they are entitled to insurance" after a family member has died, Frerichs said. Years can go by, and the insurance companies don't use records at their disposal to determine if a person has died and has family members who should be paid, he said. The insurance companies "hold onto what rightfully belongs to heirs."

Frequently, individuals buy life insurance policies at work and contribute a little money with each paycheck. Yet, members of their family don't know there was insurance or they forget to check after a death, he said.

Under Illinois law, Frerichs said his office is responsible for identifying unclaimed property and then returning it to the people entitled to it. But, he said, without doing the audits of life insurance company records, his office can't identify those who should be paid.

Records would indicate whether someone had paid for insurance year after year and then stopped paying, he said. "Some have not made contributions for 10 or 15 years, and that's a good indication the person is deceased" and may have heirs entitled to life insurance money. That information then can be matched with information from the Social Security "Death Master File" to identify people who have died. It contains about 89 million death records.

In its complaint against the treasurer, the three insurance companies claim that the Death Master File records can be incorrect. In addition, the companies say that the Illinois Department of Insurance is the only state agency that can regulate insurance companies and that the Illinois treasurer is going beyond his authority. The Illinois Department of Insurance declined to comment.

Frerichs said life insurance companies apply a double standard on access to the Death Master File. He said they use that information to identify when they should stop paying people with annuities following their death, but they don't dig into the same records to see if they should pay heirs of people who had life insurance and died.

In a statement, Kemper said Monday, "Kemper believes it is in full compliance with Illinois law regarding both unclaimed property as well as the payment of life insurance benefits."

It said, "We pay claims according to our policy terms when proof of death is provided." It added that the company has "already produced thousands of documents."

Frerichs said that his authority is different than the Department of Insurance because he has the legal responsibility to return lost property to individuals. His office returns about $175 to $200 million a year to families -- often money left in safety deposit boxes and bank accounts family members were not aware existed.

The treasurer invests assets and can devote a portion to the state's general fund while identifying families that should receive money, said treasurer spokesman Greg Rivara.

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