A new federal report finds a laundry list of problems with the Social Security Death Master File (DMF), the tool being mandated by state insurance regulators for insurance companies to use in verifying that they are in compliance with unclaimed property laws.
"Certain procedures that SSA uses for collecting, verifying, and maintaining death reports could result in erroneous or untimely death information," the GAO says.
For example, the report says, SSA does not independently verify all reports before including them in its death records.
States have been hiring vendors to comb the software of insurers since 2008 and then fining them and ordering them to turn money over to the states based on the audits by the independent vendors.
The latest settlement was mid-month with Lincoln National Group, Philadelphia, Pa. Lincoln agreed to pay a total $12.6 million to the six states that headed the multi-state task force as well as other states that agree to sign on.
Lincoln also agreed to revise a number of business practice reforms, including using the Social Security Death Master File database to search its records for deceased life insurance policyholders so beneficiaries may be paid.
California insurance commissioner Dave Jones said Lincoln National holds roughly four percent of the national life insurance market, with over $21 billion in annual premiums. He said that with this latest settlement, life insurers representing over 55 percent of the total national market have conformed or agreed to reform their business practices and use the Death Master File to search for deceased policyholders and make benefit payments.
At the same time, the National Association of Insurance Commissioners Dec. 4 agreed to consider whether to shift gears on its handling of unclaimed property enforcement issues and try to provide guidance aimed at ensuring what the industry calls "fair and uniform" settlement practices, instead of continuing to pursue the individual claims.
The Life Insurance and Annuities (A) Committee will undertake a study to determine if recommendations should be made to address unclaimed death benefits, presumably through guidance to insurers and state regulators.
The insurance industry, led by the American Council of Life Insurance, individual companies, and outside law firms retained by the companies, have been clamoring for a change in direction.
