Change in policy on unclaimed property

One key issue is whether these laws can be made retroactive or must be prospective. A recent Appeals Court decision in Kentucky reversed a lower court ruling and held that state law requires them to be only prospective.

Hudson said that the National Association of Insurance Commission's A Committee is recommending that the NAIC begin working on its own model law in 2015.

The probes started in 2009, when the California state comptroller, John Chiang, retained an outside auditor, Verus Financial, Inc., of Waterbury, Conn., to examine the files of John Hancock, Inc., to determine if John Hancock was only using the DMF to determine if a VA owner had died. John Hancock later fined, and the probe soon involved 44 states and most of the nation's largest insurance companies, both domestic and foreign.

State insurance regulators soon initiated their own probes, creating task forces consisting of a number of states that used outside vendors such as Verus to examine the files of insurance companies.

Through this and other settlements, Prudential Financial, MetLife, TIAA-CREFF, John Hancock, Nationwide Mutual and most other large life insurers doing business in the U.S. have agreed to settlements based on the task force's interpretation of unclaimed property laws.

The probes in 2012 spread to smaller companies. One of them, Thrivent Financial for Lutherans, won a case in Florida in August. The ruling by a three-judge panel in Florida's First District Court of Appeal held that Florida's unclaimed property law does not make life insurance proceeds due and payable at the time of the insured's death, according to a legal alert by lawyers at Sutherland, Asbill and Brennan.

"As a former regulator, I continue to find  troubling that these exams started with full-file data requests, and also many times ended with a very descriptive demand for using the DMF and a very keen interest in what the fine is going to be and how much is going to be paid," Hudson said. At the same time, "there were no findings in the case, only settlements," Hudson said.

She said courts "have refuted" treasurers' assertion that date of death is a dormancy trigger and insurance departments' assertions that asymmetric use of the DMF is a deceptive practice or a violation of state insurance codes.

Hudson also said that the entire episode required some insurers to institute significant operations changes, significant changes in how they manage their claims process, and "for many, many companies very large investments in infrastructure they were really not planning to make even a couple of years ago."