The National Conference of Insurance Legislators (“NCOIL”) has proposed amendments to the Beneficiaries’ Bill of Rights Model Act relating to payment of life insurance proceeds to beneficiaries. The proposed amendments come in response to recent investigations into the claims settlement practices of life insurance companies in connection with their alleged failure or delay in paying death benefits under life insurance and related products.The amendment would, among other things:
- Require that insurers implement policies and procedures to compare their insureds against the Social Security Administration’s Death Master File at least annually for the purpose of determining whether any insureds have died, thereby triggering payment under the applicable policies.
- Prohibit insurers from implementing any policy for determining whether an annuity contract owner or annuitant is deceased unless the same policy is used for determining whether insureds under life insurance policies are deceased.
With respect to matches found under (1) and (2) above, or when there is a reasonable basis for believing that an insured or account holder is deceased, require insurers to:
- confirm the death against other available records, and
- attempt to locate the beneficiary or beneficiaries of the applicable policies.
- If the beneficiary cannot be located after a good faith effort, require insurers to report and remit the benefits in accordance with the applicable state unclaimed property laws.
Note that the requirements set forth in (1) and (2) above would need to be reported to the applicable state insurance department on an annual basis.
The proposed amendment is scheduled to be considered by the NCOIL Life Insurance and Financial Planning Committee on July 15, 2011.
We will continue to monitor this topic and provide further updates on InsureReinsure.com.