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Regulators Press Life Insurers to Track Insureds

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State regulators in California and Florida say they will be looking to see how well life insurers are doing at determining when the life insurance policy insureds have died.

John Chiang, the California controller, says his office has been auditing 21 insurers to evaluate compliance with state unclaimed property claims.

The audit has found widespread problems with efforts to locate beneficiaries of life policies and annuity contract death benefits, Chiang says in a statement.

The California Department of Insurance will be working with Chiang to hold a hearing on allegations of death claim payment problems at another large insurer, officials say.

In related news, the Florida Office of Insurance Regulation says it will conduct a hearing May 19 on life insurance company “claim settlement practices, use of the U.S. Social Security Administration’s Death Master File, and compliance with unclaimed property laws.”


Chiang announced Friday that his office has negotiated a settlement with John Hancock, Boston, a unit of Manulife Financial Corp., Toronto (TSX:MFC), in connection with allegations of concerns about benefits payments.

“While John Hancock is the first to be held accountable, it will not be the last,” Chiang says. “I am prepared to pursue all actions necessary – including litigation – to bring the rest of the industry into compliance.”

Controller’s office officials say John Hancock issued a policy in February 1963 who died in April 1999 and then collected premiums from policy cash reserves until the policy was canceled in January 2009, officials say.

“The policy’s file does not contain any indication of when the last contact with the insured occurred, or that any efforts were made to locate the insurance owner prior to the policy lapsing,” officials say.

Officials say John Hancock has agreed to:

  • Come up with better methods for identifying deceased policyholders and notifying their beneficiaries.
  • Cooperate with controller’s office efforts to reunite $20 million in death benefits and matured annuities with owners and owners’ heirs.
  • Pay California “3% compounded interest on the value of the held amounts from 1995, or from the date of the owner’s death, whichever is later.
  • “Restore the full value of more than 6,400 impacted accounts dating back to 1992.”

John Hancock has responded with a statement denying any allegations or characterizations of wrongdoing and blasting California’s press release about the agreement.

“John Hancock has a longstanding record of keeping promises to our customers,” the company says in a statement. “Consistent with that record, John Hancock has entered into a groundbreaking agreement with 23 states, including California, to resolve an abandoned property audit. The agreement represents a landmark- one that helps John Hancock maintain its place at the forefront in caring for our customers.

“The agreement articulates new processes that will help effectively manage complex issues involving abandoned property. These processes are well beyond those required of insurers by law or regulation. Additional states are expected to join the agreement.

“Hancock is outraged by the unfounded allegations and characterizations contained in today’s press release by the California Controller’s Office. Indeed, by its actions today, California has violated the very agreement that it negotiated and signed with John Hancock.”


The Florida, insurance regulators say they have “delivered investigative subpoenas” two two life insurers asking representatives from those companies to appear at the unclaimed property laws hearing.

“Although these are the first companies to receive subpoenas – the office is examining other companies on this issue because the office’s information encompasses a substantial part of the life insurance industry,” officials say.

“The office’s ongoing industry examinations have revealed that some companies may use the Death Master File to stop annuity payments, but fail to use this same information to investigate claims for life insurance proceeds to the detriment of policyholders and beneficiaries,” officials say.

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