The California Department of Insurance has hired Verus Financial L.L.C. of Waterbury, Connecticut, to examine life insurer practices, including "the unclaimed property issue." Under the agreement, Verus will audit life insurers' books and will also have the power to asses fines against insurers. If an insurer does not pay the fine within 30 days of being billed, its license to do business in California may be revoked.
Although a deputy California Insurance Commissioner said that it is somewhat routine to bring in outside auditors to assist state insurance departments, some insurers fear there may be a conflict of interest because the same auditor has been hired to conduct audits for state insurance regulators and state financial officers, where the former is interested in returning assets to policyholders and the latter is interested in transferring assets to the state. Verus, which will receive a flat hourly charge under the California agreement, has signed contracts with 35 states to audit any unclaimed property practices of insurers doing business in those states. It is unclear whether those other states also grant Verus the same powers as in California.
We will monitor this development and report further as events warrant. An article in "National Underwriter" reporting on this development is available here.