Life Insurance Companies Not Paying Billions of Dollars in Claims Despite Knowing About Death of Policyholders
On April 17 2016, the CBS television show 60 Minutes ran a story titled, Life Insurance Industry Under Investigation: Audits of leading life insurance companies have uncovered a systematic, industry-wide practice of not paying significant numbers of beneficiaries, which reported on a multi-billion dollar settlement agreement that 25 life insurance companies have entered with state regulators. The story featured interviews with Florida’s Insurance Commissioner, Kevin McCarty, and Chief Financial Officer, Jeff Atwater, California’s Insurance Commissioner Betty Yee, and Oklahoma Treasurer, Ken Miller. The story reported that
In a little-known series of settlements, 25 of the nation’s biggest life insurance companies have agreed to pay more than 7 and a half billion dollars in back death benefits. However, about 35 insurance companies have not settled and remain under investigation for not paying when the beneficiary is unaware there was a policy, something that is not at all uncommon.
State investigators found that life insurers are searching the Social Security Administrations’s Master Death Index to find out which of their policyholders had died. However, when they discovered that term life insurance policyholders were on the list, they cancelled policies but did not contact beneficiaries to pay benefits, even when they knew who those beneficiaries were.
Even worse, when the deceased person on the Social Security list held a whole life policy – one that accumulates cash value, but allows premiums to be paid from that cash value – many life insurers left the policy in place and continued to charge premium loans against the cash value. They also did not contact beneficiaries. Effectively, the life insurance companies were sucking the cash value down until it was greatly reduced or gone, and not telling the beneficiary who should have gotten the money.
State regulators plainly believed that life insurers were stealing money from beneficiaries. But that is not how the insurance companies see it. Where the life insurance companies knew of a death, they took the position that until someone filed a claim, they had no obligation to pay a claim. Florida Insurance Commissioner McCarty said,
many of the companies routinely and deliberately disregarded evidence in their own files that the policyholders had died.
Miller, Oklahoma’s Treasurer, pointed out “the most important issue…that’s the time value of money. Because that’s what this is all about. This is about money. That $22,000 invested for 50 years at an eight percent return becomes $1.2 million.”
And there you have it. Life insurance companies acting in their own best interest when it comes to money….keeping billions, and not paying it to beneficiaries who rightfully should have had the money. Buyer beware.
If you would like to discuss the life insurance settlement agreements or your rights under a life insurance policy, contact life insurance attorney John V. Tucker online or call (866) 282-5260.