Why we don’t buy life insurance

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Why don’t Americans buy life insurance? At least part of the answer is that we’re not absolutely convinced that the money we tuck away all those years will actually pass to our heirs once we’re gone.

According to the Life Insurance and Market Research Association, or LIMRA, 56 percent of U.S. households did not have an individual policy as of 2010, a 50-year high. Nearly a third of us (30 percent) lacked any coverage at all, even through an employer’s group plan – and that number has grown 22 percent in six years.

Granted, life insurance isn’t likely to compete with food, shelter or even homeowners and auto insurance on most people’s priority lists these days. Even so, in a 2011 telephone survey by the accounting firm Deloitte, 1 in 4 respondents admitted they don’t trust life insurance companies or life insurance agents.

“Either way, the industry has some serious trust issues to address with a significant percentage of consumers,” Deloitte concluded.

Last week, the ongoing multistate, multiagency investigation into life insurers behaving badly surfaced in the news once again when Florida and several other states reached a $40 million settlement with MetLife over alleged improprieties in tracking down the beneficiaries of deceased policyholders. The settlement could result in more than $400 million in death benefits from industrial life policies sold between 1900 and 1964 being paid to the rightful beneficiaries or, failing that, to the appropriate state’s unclaimed property fund.

“MetLife had apparently been using the Social Security Administration’s Death Master File to check to see if a policyholder has died only in cases where such a death would be beneficial to the insurance company. For example, MetLife allegedly used this Master File to stop annuity payments to deceased clients, but did not use it to issue life insurance payments to beneficiaries of the insured,” according to a Miami Herald report.

While the settlement allows MetLife to deny any wrongdoing or liability, it does require the insurer to reform its business practices and step up attempts to find beneficiaries within 120 days of a policyholder’s demise. If no beneficiary is found within a year, MetLife agrees to pay the death benefit or annuity payment to the appropriate state.

The $40 million MetLife settlement will go entirely to cover legal costs, including those of the task force launched in early 2011 by the National Association of Insurance Commissioners.

MetLife joins John Hancock Life and Prudential, which previously reached similar settlements with the investigating jurisdictions.

And so it goes, another life insurance giant deftly flicks an unseemly speck from its immaculate lapel. We did no wrong. We don’t owe anyone. Oh yeah, and of course we’ll try to do better.

I can’t imagine why consumers don’t trust them.

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