As previously reported, the New York Attorney General Eric Schneiderman began issuing subpoenas in late June to various life insurers concerning their use of the Social Security Death Master File (“DMF”) and compliance with New York’s abandoned property laws. The New York Attorney General has issued at least nine subpoenas as part of an investigation into how the life insurance industry uses the DMF. As noted in our prior alerts, life insurers have been accused of using the DMF to stop payments on annuity products, while neglecting to use the list to identify deceased policy holders in order to timely pay life insurance benefits.
In furtherance of this investigation, New York’s insurance regulators said this week they have mandated all life insurers in the state to check available DMF data to ensure that they are paying death benefits owed. According to a press release, the New York Insurance Department (“Department”) issued 172 letters to life insurance companies seeking reports on how effectively the insurers use the DMF and other available information to identify claims that should be paid. The letters constitute requests for information to which insurers are legally required to respond.
"The department is concerned that there may be instances where a death has occurred and no claim has been filed,” the insurance regulator said in a statement. “If a life insurance policyholder dies and stops paying premiums, the company may continue to deduct the premiums from the account value until the value is gone.”
The Department said the insurers were required to use all available data to determine when life insurance benefits were due, to locate beneficiaries, and to make payments. The insurers must report on the results, beginning in September 2011 and continuing for six months. The reports will be subject to audit.
The Department also advised that it is proceeding with efforts to amend the unfair claims practices regulations to require life insurers to perform regular DMF cross-checks and to require life insurers to request more detailed policyholder and beneficiary information to facilitate identifying deceased policyholders.
We will continue to monitor developments in this ongoing investigation and provide updates as necessary.