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Life insurance that cheats death?

By Jay MacDonald ·
Tuesday, October 16, 2012
Posted: 10 am ET

Nationwide last week joined the walk of shame of major life insurance companies whose lax attitude toward unclaimed policies has prompted regulators to intervene.

In 2008, the National Association of Insurance Commissioners formed a multistate task force to investigate how the life insurance industry handles unclaimed death benefits. The task force estimates that life insurers have failed to pay more than $1 billion in death benefits over the years, largely due to the common practice of requiring beneficiaries to file a claim following a death.

Regulators found that Nationwide, like other life insurers, used the Social Security Administration's Death Master File, the most definitive list of Americans who have died, to closely track and cut off the payment of annuities when a policyholder dies. That's common practice because policyholders only receive annuity payments while they're above the lawn, so to speak.

The problem is, Nationwide, like other life insurers, failed to use the Death Master File to identify deceased life insurance policyholders and pay the death benefits due their heirs.

In a settlement involving seven states, Nationwide paid $144.1 million to beneficiaries and $7.2 million to states in 4,747 unclaimed death benefits. Like other insurers that appeared to have cheated death, so to speak, Nationwide admitted no liability.

Under terms of its agreement, Nationwide must crosscheck its life policies against the Master Death File every month to locate the beneficiaries of unclaimed policies. If unable to locate beneficiaries, the insurer must pay the policy benefits to the unclaimed property division of the state where the deceased  resided. Some states allow insurers to retain unclaimed policies on their books until the insured would be at least 95 years old.

Nationwide joins John Hancock, MetLife and Prudential in reaching settlements. Other companies still under task force review include American International Group and Lincoln Financial.

As I noted in a previous blog, a 2011 telephone survey by the accounting firm Deloitte revealed that 1 in 4 respondents don't trust life insurance companies or agents. The industry's self-serving nonchalance toward beneficiaries is one of the reasons why.

The good news is, insurance regulators are taking steps to reform some of the more outrageous practices.

What remains to be seen is whether the life insurers themselves will change their ways and rebuild that bond of trust, or simply pay their penalty and revert to business as usual.

Follow me on Twitter: @omnisaurus.
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Quote Home
November 07, 2012 at 1:25 am

yeah i am content with your post.All companies are not cheat but must recognize is it either the right company or not.
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October 22, 2012 at 8:54 am

There are many other Life Insurance company which cheats the normal people and takes all the benefit of their Insurance policy. The same case happened with me. But I managed myself before any wrong thing happened with me. So you have to be very careful before insuring your life insurance in any company.


October 19, 2012 at 3:56 am

Where can you find a copy of the death master file?
Please forward info to my e-mail
thank you

bob burlingame
October 18, 2012 at 5:54 pm

I am a Dave Ramsey fan and was helping a family get rid of a whole life policy with Shenandoah Life that they had been paying on for about 15 years. When teir term policy came in I heped them draft a letter to Shenandoah Life to get there $4,500 in cash value out of the policy..approx. 3 weeks later the got a letter from the state of Virginia advising him that Shenandoah Life was in bankruptcy and all of their assets were "frozen". Of course they were willing to accept his premium payment every month bu wer not willing to give him the "guaranteed" cash value in the policy. They made him fill out forms for a hardship which they denied immediately..It has been over six months now, the still have his money. But he now has three and one half times the coverage at about half of the cost of the whole life policy That's the differenc between cash value and "Buy Term and Invest the Difference"

October 18, 2012 at 3:02 pm

People make sure you keep up with your beneficerary...if someone you listed passes away before you do make sure you request a change with your life insurance company. My mom has shown us where she keeps her paperwork and we all know who is the executor of her estate and is also a good idea to know who is the agent who sold them the policy.

October 18, 2012 at 2:23 pm

Frank. We don't have the money yet.. We sent in appropriate papers, ie first class/receipt request.. Have a feeling they will come up with something. IF they do..I will get a lawyer. It's a very small amount, but I told my brother wheres the interest they made on the money they had from my step mother. all those years holding it! Will keep this in bookmarks and let you know it comes thru or not.

October 18, 2012 at 1:37 pm

My father-inlaw passed away fifteen years ago and had a life insurance policy with Mutal Of Omaha and one with Prudential. He lived with us for ten years and each month paid his premiums right on time. When my sister-inlaw tried to find after he passed
and was told he was not on the books-or computer.
He passed away at age eighty five and was very private and would
not let anyone look at his bank account or policies.
Is there anyone out there that can help us?


October 18, 2012 at 12:37 pm

This too has happened to us. A couple weeks ago Mutual of Omaha contacted my husband about a life insurance policy his father had. He had passed in 2005. The family had no idea his father had this small pot of money for them. It wasn`t a huge amount..anough for burial expences. I am happy to know that there is a Commission that policese the industry to keep it honest. Having children of my own, I am going to copy this news alert so they too can be aware on how dishonest big companies can be and to impower them. Also..this article makes me aware on how I TOO need to be responsible and proactive to my own Will and Insurances that need to be carried out upon my death. But sometimes thats easier said then does its own thing sometimes...

October 18, 2012 at 12:11 pm

Last week I was contacted by an insurance company about my mothers life insurance policy. She passed away 5 years ago,the insurance company refused to pay out the policy because my father was the beneficerary and he had passed the year before. I was wondering why after all of these years they decided to pay,now I know it wasnt out of the goodness of their heart it was because someone finally put a boot up their a**.