New Rules Directing Insurers to Pay Unclaimed Life Insurance Proceeds

Search Process that Won $262 Million for Consumers Nationally is Now Industry Standard in New York

The Department of Financial Services (DFS) has put in place new regulations that require all life insurers doing business in New York to regularly search a government list of recent deaths to identify deceased policyholders and then find and pay beneficiaries of policies for which no claims have been made.

Last July, the DFS initiated an investigation into life insurers claims practices that has resulted in 32,715 payments of $262.2 million to consumers nationwide, including 7,525 payments totaling $95.9 million to New Yorkers. 

New York was the first state to order the cross-check policy, but that order only applied to policies in existence at that time.

“People sacrifice to buy life insurance to help their loved ones after their death, so it’s reasonable to make sure their families actually receive the benefits when they are eligible. Our investigation clearly proved that life insurers should be checking the list of recent deaths as a standard practice to find out when benefits may be due,” Governor Cuomo said. 

Benjamin M. Lawsky, Financial Services Superintendent, noted, “Insurance companies will now be matching their life insurance policy lists with the death index database on a regular basis. Conducting computer matches isn't much of a burden and the benefits to consumers are significant. 

With these matches and with New York’s new free online Lost Policy Finder, we have substantially reduced the chances of life insurance policies not being paid when someone dies." 

The DFS investigation found that many insurance companies regularly checked the list of recent deaths from the U.S. Social Security Administration to stop making payments on annuities after annuitants had died. Yet those same insurers failed to use the list to determine if a life insurance policyholder had died and proceeds were payable to beneficiaries.

Because of the cross checks not being done, policies went unpaid when family members were unaware of the existence of a life insurance policy or lacked sufficient information to file a claim with the insurance company. As a result, tens of thousands of families did not receive life insurance benefits to which they were entitled. 

As a part of its investigation, the state demanded that insurers use the U.S. Social Security Administration’s Death Master File to investigate policies for which no claims have been made and to find beneficiaries who are eligible for benefits but have not filed claims.

The new regulation requires insurers to implement reasonable procedures to identify unclaimed death benefits, locate beneficiaries, and make prompt payments. Insurers must now comply by doing the following:

Cross check their policies at least every three months with recent deaths using the Social Security Master File of deaths or another database acceptable to the Superintendent of Financial Services.

When a policy is sold, request more detailed beneficiary information, such as social security number and address, to facilitate locating and making payments to beneficiaries when a death occurs.

Search for multiple policies on the same person in the files of all insurers owned by a holding company.

Cross-check policies with consumer requests received through the State’s new Lost Policy Finder, a free on-line service, located at www.NYPolicyFinder.com, to help consumers locate life insurance policies that have been lost or misplaced.

The focus of the Cuomo Administration initiative has been to ensure that benefits go to consumers. That is why DFS instructed life insurers to conduct searches for beneficiaries who are eligible for benefits and pay them.

In addition, insurers, like many other businesses, are legally required to turn over to the State funds that are payable to consumers but remain unpaid for a legally determined period of time. In the case of life insurance policies, the term is generally three years.

In New York, those unclaimed funds are transferred to the Office of the State Comptroller, which provides an on-line database where consumers can search for and claim their property.

The new regulation also requires life insurers to submit every year to the Office of the State Comptroller the number of policies for which a death occurred but for which the insurers were unable to find the beneficiary. 

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