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Illinois Acts on Multiple Policies

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NU Online News Service, July 18, 6:10 p.m. – Illinois has published the final version of a regulation that will require life insurers to check to see whether insureds who die have multiple policies in force.

The regulation, which will take effect in July 2003, deals with the procedures life insurers must follow when they receive death claims.

The final version requires life insurers to consider policyholders born up to two years before and up to two years after the insured’s alleged birth date when checking for additional policies.

Originally, a draft version would have required insurers to consider policyholders born up to three years before and up to three years after the insured, but a cost-benefit analysis persuaded the department to reduce the timeframe, according to Illinois Insurance Director Nat Shapo.

The shorter time frame will probably reduce the number of “potential hits” 5%, but it should also reduce compliance costs about 33%, Shapo says.

Illinois believes it will be the third state to implement multiple-policy guidelines.

New York established multiple-policy guidelines in Circular Letter Number 15, which was issued July 3, 2001. The New York circular letter requires insurers to conduct a search for other policies on an insured’s life once a claim is filed.

Massachusetts set out its guidelines in Bulletin 2001-07. The Massachusetts bulletin requires a life insurer to search for multiple policies with “due diligence.”

At the National Association of Insurance Commissioners, Kansas City, Mo., the small face amount survey subgroup is still trying to develop a multiple-policy model regulation.

The American Council of Life Insurers, Washington, is surveying its members to find out whether they have computer systems in place to check for multiple policies, and what methods insurers without such systems use to check for multiple policies. The ACLI survey also asks insurers about the insured names and other types of data used to check for multiple policies.

In addition to sending the survey to its own members, the ACLI plans to send the survey to members of the Life Insurers Council, Atlanta; the National Alliance of Life Companies, Rosemont, Ill.; and the National Fraternal Congress of America, Naperville, Ill. The ACLI hopes to make results available in August.