(Updates with regulator requirements, MetLife comment and share prices starting in seventh paragraph.)
July 5 (Bloomberg) -- MetLife Inc. and Prudential Financial Inc., the largest U.S. life insurers, are among firms ordered by a New York regulator to use current Social Security Administration data to determine when death payments are due.
The New York Insurance Department is requiring the 172 life insurers and fraternal benefit societies licensed in the state to make payments based on the data and report on the results for six months beginning in September, according to a statement today from the regulator. The department said it is working to make the requirement permanent.
State regulators are intensifying a probe into unpaid benefits after Florida Insurance Commissioner Kevin McCarty said in May that insurers may be keeping at least $1 billion in unclaimed benefits owed to policyholders, beneficiaries or states. MetLife and Prudential are among nine firms subpoenaed in June as part of New York Attorney General Eric Schneiderman’s probe, a person familiar with the matter said today.
“MetLife has enhanced its processes and procedures, including by using the Social Security Death Master File as a safety net to catch claims that are not reported to us in the normal course,” John Calagna, a spokesman for the insurer, said in an e-mail. It made “extensive efforts over the years to locate customers,” he said.
Proof of Death
Liability for life insurance begins when the company receives proof of death, which is different than what happens in the annuity business, according to testimony by Todd Katz, executive vice president of insurance products for New York- based MetLife, at a hearing on unclaimed benefits in May. If annuities continue to be paid out to deceased recipients, the insurer may have to reclaim those payments, he said. “The department is concerned that life insurers may not be adopting and implementing reasonable standards for investigating claims and locating beneficiaries,” the New York insurance regulator said in today’s statement.
Life insurers are generally required to pay claims after being notified of a policyholder’s death and receiving a valid death certificate. If insurance companies aren’t notified of a death, they usually are required to hold the funds until the insured would be about 100 years old, plus an additional three or five years, depending on the state, before turning the money over to the state as unclaimed property.
Ordered to Report
Insurers based in New York will need to report on policies they sell nationwide unless directed otherwise by another state regulator, according to the insurance department’s letter. Firms based outside New York need to provide information on policies issued in the state.
Simon Locke, a spokesman for Newark, New Jersey-based Prudential, declined to comment on the subpoena or the New York regulator’s statement.
Among companies subpoenaed last month by the New York attorney general are Genworth Financial Inc., AXA Equitable Funds Management Group LLC; The Guardian Life Insurance Co. of America; John Hancock Insurance Agency Inc.; MassMutual Asset Finance LLC; New York Life Insurance Co. and TIAA-CREF Insurance Agency LLC, said the person, who declined to be identified because the investigation is current.
The subpoenas were reported earlier in the Wall Street Journal.
Axa SA received a subpoena for information and documents concerning the use of the Social Security death master file and is “committed to cooperating fully,” Chris Winans, a spokesman for the company, said in a phone interview.
Spokesmen for Genworth, Guardian and New York Life confirmed the subpoenas and said the firms will cooperate with requests for information. TIAA-CREF will “fully cooperate with any official request for information,” spokesman John McCool said in an e-mail.
Mark Cybulski, a spokesman for MassMutual, declined to comment. John Hancock representatives didn’t return e-mails and calls for comment.
Insurers say they already work to locate beneficiaries.
Genworth has “compliant and robust practices to determine when claim payments are due,” Al Orendorff, a spokesman for the company, said in an e-mail.
MetLife fell 66 cents, or 1.5 percent, to $43.72 at 4:15 p.m. in New York Stock Exchange composite trading. Prudential declined 60 cents, or almost 1 percent, to $64.17.
--With assistance from Karen Freifeld and Alexis Leondis in New York. Editors: Dan Reichl, Dan Kraut
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