On November 20, 2011 the Executive Committee of the National Conference of Insurance Legislators ("NCOIL") approved the Model Unclaimed Life Insurance Benefits Act (the "Unclaimed Benefits Model Act"), which requires insurers to periodically review the Social Security Administration's Death Master File for deceased life insurance policyholders and retained asset account ("RAA") owners.
Following the public hearings on May 19, 2011 by the Florida Office of Insurance Regulation and on May 23, 2011 by the California Department of Insurance and several states' investigations of insurers' claims settlement practices, NCOIL's Life Insurance & Financial Planning Committee decided to draft the model legislation on July 17, 2011. This decision resulted from the Committee's concern that life insurance companies were regularly using the Death Master File to identify deceased annuity owners and to end annuity payments, but were not using it pay out unclaimed life insurance benefits.
NCOIL subsequently released a draft of the Unclaimed Benefits Model Act for interested-party comment. The version of the Unclaimed Benefits Model Act adopted at the November 17th Life Insurance & Financial Planning Committee meeting contained one significant change from the earlier draft, which required only insurers who were using the Death Master File to determine if a policyholder or contract holder is deceased for other purposes to compare the Death Master File against the insureds of its in-force policies and holders of RAAs. The November 17th version expanded the scope of insurers required to use the Death Master File to all life insurers, whether or not they are using the Death Master File for other purposes. The Unclaimed Benefits Model Act was approved by NCOIL's Executive Committee on November 20, 2011 without further revision.
The various investigation and notice requirements of the Unclaimed Benefits Model Act will impact the operations of all life insurers, with the most severe impact on life insurers who do not write annuity business and previously had no other reason to use the Death Master File. Moreover, the Unclaimed Benefits Model Act prohibits insurers from charging insureds, account holders, or beneficiaries for any fees or costs associated with the Death Master File search or investigation process. Overview of the Unclaimed Benefits Model Act Requirements:
The Unclaimed Benefits Model Act requires:
- At least quarterly, an insurer compare the insureds of its in-force life insurance policies and holders of RAAs to the Death Master File.#
Within 90 days of a match of the social security number or name and date of birth of an insured, annuity owner, or RAA owner, the insurer must:
- Complete and document a good-faith effort to confirm the death of the insured or RAA owner against other available records and information.
- Determine whether benefits are due under the insured's or RAA owner's policy or contract.
- If benefits are due, use good faith and document efforts to locate beneficiaries.
- Send the beneficiary claims forms or instructions to make a claim, including the need to provide an official death certificate if applicable under the particular policy or contract.
- If beneficiaries or owners are not found, the benefits or account is to be escheated to the state as unclaimed property in accordance with state unclaimed property laws and the insurer must provide additional information to the state unclaimed property agency about the unclaimed property.
The Unclaimed Benefits Model Act limits the scope of insurers' obligations with respect to group life insurance, requiring only insurers that provide full recordkeeping services to the group policyholder to confirm the possible death of an insured. The Unclaimed Benefits Model Act expressly excludes policies or certificates of life insurance that provide a death benefit under an employee benefit plan subject to ERISA as well as annuity contracts used to fund employee-based retirement programs that do not require the payment of death benefits to beneficiaries of specific plan participants.
Failure to comply with the requirements of the Unclaimed Benefits Model Act results in a violation of the state's unfair trade practices statute.
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The Unclaimed Benefits Model Act does not impose any obligations on insurers unless and until it is adopted by state legislators. We will continue to monitor the development of state regulatory requirements on insurers as to unclaimed benefits and the developments regarding litigation involving and state investigations into unclaimed benefits.