On November 3, 2011, the New York Attorney General and the New York State Comptroller announced a joint initiative to investigate possible unpaid life insurance benefits. Attorney General Eric Schneiderman called the new collaborative effort, “the largest and most comprehensive investigation of life insurance practices in the country.” Earlier this year, both offices reviewed data subpoenaed from life insurance companies operating in New York which they believe indicated that some insurers may have failed to pay death benefits and/or failed to turn over unclaimed policy proceeds to the state Comptroller as required by the state’s abandoned property law.
Thomas Workman, president of the Life Insurance Council of New York ("LICONY"), said that LICONY's insurance company members are in compliance with their contracts under state insurance laws and that they “pay death benefits when a legitimate claim is filed.” LICONY's 70 members account for 95% of the life insurance business in New York. According to Workman, the life insurance industry as a whole in New York paid $30 billion in life insurance benefits in 2009.
The New York Insurance Department, now part of the New York Department of Financial Services (the “Department”), conducted a similar investigation in July 2011. The Department stated it is working on a new set of regulations that will require life insurers to use official government lists of deaths, such as the Social Security Administration’s death master file, to determine when payment of a life insurance benefit is required.
Mr. Workman indicated that his organization’s membership has “no problem with some kind of reasonable new standard being applied prospectively,” as recent advances in computer technology, which have outpaced the law, now make it possible for life insurers to periodically check life insurance policies against official death records. Workman, however, cautioned that there were recent press reports of errors in the Social Security database.