NU Online News Service, Nov. 20, 3:33 p.m. – Examinations of two companies by Illinois insurance regulators have found that death claims on “thousands” of policies nationwide were not paid because those companies did not check to see if deceased insureds owned policies other than the contracts claims were filed against.
Illinois Insurance Director Nat Shapo says the companies, which he declined to name until reports are released, suggested a “high incidence” of unpaid benefits, although he adds that at this time, there is “no evidence that [these incidences] are deliberate.”
The death claims under scrutiny were made in the last decade, Shapo says.
An agreement is complete with one company for payment of any claims plus interest, according to Shapo. A decision on whether to impose a penalty has not yet been made, he says.
Shapo says that although the examinations focused on books of industrial policies–typically policies with small face amounts–the issue might extend to other types of policies. The spotlight is currently on small face amount policies, but the problem could also exist elsewhere, he says. Small face amount policies are typically considered those with total benefits of $15,000 or less.
It is also a “race neutral” issue, Shapo contends.
A regulation is currently being developed in Illinois to require companies to search for multiple policies. It could be enacted by other state insurance departments.
“It is an obligation [of companies] to seek out payment of beneficiaries even when claims are not filed,” says Shapo. “We are saying that it is a terrible shame as well as being a regulatory issue if companies have information that beneficiaries should be paid and have failed to do so.