April 23, 2012|By Ben Berkowitz | Reuters
MetLife,
the largest life insurer in the United States, will pay nearly $500
million to settle a multistate investigation into unpaid claims for dead
policy holders, state regulators and the company said on Monday.
The
investigation -- led by states including Illinois -- related to the use
of the Social Security "Death Master" file, which lists people who have
recently died. A number of states have accused insurers of using the
list to stop making annuity payments to dead customers, but at the same
time not using the list to check whether any life insurance policy
holders had passed away.
The
settlement follows a similar deal that Prudential Financial, the
country's second-largest life insurer, struck with 20 states in January.
The
National Association of Insurance Commissioners, on a conference call
to discuss the MetLife investigation, said there are still eight Death
Master probes under way and that it is hoping for settlements in those
cases like the MetLife and Prudential deals.
One state official said those two deals could force other companies' hands.
"We're
hopeful that this MetLife settlement is going to dislodge a stone,"
Adam Cole, the general counsel of the California Department of
Insurance, said in an interview. "They have differing stances. We really
do hope that with both Prudential and MetLife, the other companies will
realize it's important to enter into these agreements."
A
spokesman for MetLife said its settlement contemplates $438 million in
payments to policyholders and beneficiaries, plus $40 million in
settlement costs, for a total approaching $500 million.
In a
statement, MetLife said $188 million in payments will be made this year
and the rest over the next 17 years. The company is fully reserved for
the deal, having topped up the reserve in the first quarter of this
year.
"The company has been working with regulators to develop
industry best practices and is pleased to announce new processes that
will provide an even stronger safety net for the limited number of
beneficiaries who do not submit a claim to the company in the normal
course of business," the company said.
The deal requires MetLife
to restore the full value of any account that was improperly drawn down,
comply with state unclaimed property laws and pay 3 percent compounded
interest on amounts that had been held back, starting with either the
date of the policy owner's death or Jan. 1, 1995, whichever came later.
The
company said it has set up an online system to help people track down
policies. It also said it is contacting older policyholders, many of
whom took out their insurance without providing a Social Security number
or date of birth, and in some cases will offer them an accelerated
payout on the policy.
MetLife shares were up 1.1 percent at $35.34 in afternoon trading.
The lead states on the MetLife deal were California, Florida, Illinois, New Hampshire, North Dakota and Pennsylvania.
Separately
from the MetLife deal, earlier on Monday New York officials said their
own probe into Death Master abuses had led insurers to make more than
$260 million in payments to policy beneficiaries who may not have been
aware they had money due to them.
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