EDITORIAL: If the dog eats your insurance policy

April 18--Raise your hand if you have a life insurance policy. Raise your hand if you have no idea where it is. Raise your hand if you expect your life insurance company to track down your loved ones if something happens to you.

Raise your hand if you'd be angry if the company didn't.

We thought so.

Until a new law took effect Jan. 1, life insurance companies that sold policies in Illinois didn't have to do much to track down beneficiaries. When someone covered by a policy died, the responsibility under the law to collect the money fell to the beneficiary -- the person left behind who may not even know a policy exists.

It happens. Sometimes, people check a box for life insurance on a workplace form and forget about it. Sometimes, policies get lost during a move. Sometimes, families split up. Sometimes, beneficiaries are too young or, later in life, too incapacitated to pursue a death benefit.

A bill in Springfield would expand on the Jan. 1 law by requiring life insurance companies to go through their records and cross-check the names of the insured against all deaths since 1996. The Social Security Administration already maintains what is called the Death Master File, a database of all deaths nationally.

If a death occurred and a benefit was unclaimed dating back to 1996, the insurance company would have to attempt to find the beneficiary.

That's not too much to ask. Current rules let insurance companies off the hook for all policies sold before Jan. 1.

The Illinois state treasurer's office, which oversees unclaimed assets, is pushing the legislation to tighten the rules. Treasurer Michael Frerichs says it's a problem that should be addressed at the front end. Many of the companies in question also sell annuities, so they're checking the federal death files anyway. Asking them to cross-check the files against the insured who hold policies is not overly burdensome, Frerichs says.

Rep. Robert Martwick, D-Chicago, is the chief sponsor of the bill. It is expected for a vote in the House later this month and, if approved, would move to the Senate.

"These life insurance sellers sat at a dining room table and handed someone the pen to sign up. They said, 'Don't worry. We'll be there for your family,'" Martwick says. "We're making the laws equate to that expectation."

Insurers who object to Martwick's bill say the legislation is too onerous. It's too heavy-handed. The American Council of Life Insurers says that while it supports efforts to cross-check records with the federal database going forward, retroactively asking companies to dig back to 1996 is a violation of contract law in the Illinois Constitution. The insurance industry is fighting the legislation in Springfield.

But keep in mind the legislation became necessary only when it was clear some insurance companies were looking the other way and hanging on to benefits. An audit within the treasurer's office found roughly $550 million in benefits since 2011 had gone unclaimed, perhaps because beneficiaries didn't know the money was there.

Some insurers have routinely matched the names of their insureds against Social Security's death list. But this bill is for the ones that haven't. Lawmakers ought to recognize that.

And if you have a life insurance policy, be sure to tell your loved ones. Otherwise, the death benefit could end up getting rolled into an insurance company's asset portfolio or sitting unclaimed at the treasurer's office. That's no insurance at all.

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