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Life Health > Life Insurance

California Regulators: When Did You Computerize Your Records, and When Did You Sweep Them?

By Allison Bell

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California regulators grilled representatives from Metropolitan Life Insurance Company on the finer points of life policy administration automation today during a hearing on unclaimed property issues.

The California Department of Insurance and the California controller’s office asked MetLife, a unit of MetLife Inc., New York (NYSE:MET), to send executives to testify at the hearing, to address allegations that MetLife has been less conscientious about looking for life insurance policy insureds who may have died than it has about looking for annuity benefits recipients who may have died.

California Controller John Chiang announced in April that Verus Financial L.L.C., Waterbury, Conn., had found evidence of problems with handling of life insurance claims and handling of unclaimed property at many large U.S. insurers.

The California Department of Insurance and the California controller’s office are conducting a market conduct examination of the 10 largest life insurers doing business in California. Investigators will look for evidence of life insurers failing to pay death benefits to beneficiaries after learning that insured individuals had died.

Todd Katz, executive vice president for insurance products at MetLife, said during the California hearing, as he said May 19 during an unclaimed property hearing in Florida, that MetLife had started using the Social Security Administration’s Death Master File to “match,” or “sweep,” its group annuity records on an occasional, largely manual basis in the late 1980s, and that it had started to conduct group annuity sweeps in a more systematic fashion in the mid-1990s.

One reason MetLife waited longer to try to sweep the group life records is that, in most cases, in the group life market, “the employer has the records,” Katz said. “In many situations, it’s the employer that submits the claims.”

A few employers have conducted Death Master sweeps of their own employees’ records, Katz said.

“Not many,” Katz said. “A handful.”

MetLife found that another challenge was that the company had not collected and stored Social Security numbers from insureds on a routine basis until the mid-1980s.

MetLife tried doing life policy Death Master sweeps for three states in 2004 and 2005, and then conducted a sweep of most of its life policies in 2007, Katz said.

MetLife found that it ended up paying more than 99% of the claims that it paid through the regular claims process, rather than through the sweeps, Katz said.

MetLife paid $44 billion in death benefits during the period covered by the sweep. The Death Master sweep identified insureds who had died with $83 million in death benefits in force; MetLife eventually found the beneficiaries for $51 million of the death benefits, and it put $32 million in death benefits into its unclaimed property handling system.

In 2010, MetLife decided to conduct annual Death Master sweeps, Katz said.

Regulators asked the MetLife executives to give them exact year when life insurance policy administration had been computerized and when Death Master sweeps had been introduced; the executives said they did not know the exact year.

A regulator also asked whether any executives could testify under oath that a document the company had submitted that describes the company’s administration efforts is accurate. The executives asked for more time to go over the document.

Regulators later asked about the details about how MetLife had proceeded in 2007 when it uncovered 3-point Death Master File matches — a policyholder who had the same name, Social Security and date of birth as an individual in the Death Master File — and when it uncovered 2 point matches. A “2-point match” was a policyholder who had either the same name and Social Security number or the same date of birth and Social Security number as an individual in the Death Master File.

California Insurance Commissioner Dave Jones asked whether MetLife had published the names of the 3-point matches and 2-point matches that it had difficulty locating.

Katz told regulators that responding to some of their questions about the sweeps and post-sweep procedures was difficult.

“Many of the decisions were made well in the past,” Katz said.

In a written statement, MetLife notes that it sold many low-death-benefit industrial life insurance policies from early in the 1900s up until 1964. MetLife began waiving any premium payments on premium-paying industrial policies with premiums paid through 1981, and it has no easy way to contact many of the holders of those policies, the company says.

MetLife found about 500,000 of the holders of the industrial policies in the 1980s, by organizing a “Family Reunion” media campaign. MetLife then made another major effort to reconnect with policyholders around 2000, in preparation for demutualization.

Other unclaimed property coverage from National Underwriter Life & Health:

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