The state of Florida, along with several other states, has reached a $40 million settlement with a group of MetLife insurance companies over allegations of life insurance improprieties. All of that money is being used to pay for the states' investigation, but consumers may receive more than $500 million in other payments.
Consumers may benefit from new business practices that MetLife has agreed to use moving forward.
MetLife had apparently been using the Social Security Administration’s Death Master File to check to see if a policyholder has died only in cases where such a death would be beneficial to the insurance company. For example, MetLife allegedly used this Master File to stop annuity payments to deceased clients, but did not use it to issue life insurance payments to beneficiaries of the insured.
Consumers who were harmed will not take part in the $40 million component of the settlement, which is the financial amount actually listed in the settlement documents. The national settlement grants immunity to MetLife from "all claims, demands, interest, penalties, actions or causes of action" that may have resulted from the 3-year investigation. As a part of the settlement, MetLife denies any wrongdoing and does not admit any liability.
But he national settlement includes what is being estimated as $400 million for industrial life insurance policies that were sold between the early 1900s and 1964. If MetLife can not track down the owners of those several-decades-old policies within six months, it will remit the funds to the various states' Unclaimed Property departments. Florida's cut of the $400 million is estimated at about $9 million, covering 15,000 policies (about $600 a pop).In addtion to the $400 million, another estimated $200 million is slated to go to holders of non-industrial policies. It's not clear what Florida's share of that will be, but the money is expected to be doled out over the next few years.
Florida's settlement involved the Office of Insurance Regulation, Chief Financial Officer Jeff Atwater and Attorney General Pam Bondi. The state's investigation began in 2009, under a prior administration.
"This agreement represents another milestone in the ongoing coordinated multi-state multi-agency investigation to change industry practices," said Insurance Commissioner Kevin McCarty, in a statement. "Consumers need to know that when purchasing insurance products critical to their financial security – a promise made is a promise kept."
It's not clear how the $40 million will be divided up among the states. Florida, one of the lead states in the investigation, is expected to receive about $2.9 million and will play a role in determining how to allocate the funds.
Here's the press release from OIR:
Florida Announces a $40 Million Multi-Agency Agreement with MetLife Insurance Companies – Could Return Over $500 Million to Consumers
TALLAHASSEE, Fla. – Florida Insurance Commissioner Kevin McCarty announced today that a $40 million settlement has been reached between nine Metropolitan Life (MetLife) insurance companies and the Florida Department of Financial Services (DFS), overseen by Chief Financial Officer Jeff Atwater, the Florida Office of the Attorney General (AG), overseen by Attorney General Pam Bondi, and the Florida Office of Insurance Regulation (Office) along with the lead states in the investigation. The agreement pertains to the location of life and annuity beneficiaries and the reporting of unclaimed property. A copy of the agreement and related orders is available here: National Regulatory Settlement Agreement; Florida Multi-Agency Agreement.
As part of the agreement, MetLife agreed to:
- · Adopt business reforms strengthening efforts to locate policyholders and beneficiaries within 120 days of an insured’s death.
- · Conduct quarterly matches for a year, and then monthly matches against the Death Master File to check for evidence that a person insured by Metlife may have died. If a match is found, the company will conduct a “thorough search” for the insured or beneficiaries using databases, mail, telephone calls and email (if available).
- · If, within one year, an insured or beneficiary cannot be found, MetLife will report and pay the death benefit or annuity payment to the appropriate unclaimed property department.
- · MetLife also agreed to search for insureds or beneficiaries of low-value or industrial life insurance policies that were sold in the early 1900’s up to 1964. Many of these policies were sold in Florida. MetLife is making extra efforts to gather information needed to identify these insureds. The industrial policies alone are estimated to include almost 15,000 Florida policyholders with over $9 million in face value. The face value for national industrial life policies is expected to exceed $400 million.
This agreement is the result of a joint investigation undertaken with the Office, DFS, the AG, and coordinated with the insurance departments of Illinois, California, Pennsylvania, New Hampshire and North Dakota. A related agreement is being signed by MetLife and Unclaimed Property officials in 30 states.
“This agreement represents another milestone in the ongoing coordinated multi-state multi-agency investigation to change industry practices. Consumers need to know that when purchasing insurance products critical to their financial security – a promise made is a promise kept. We will remain vigilant in our review of other large insurance groups and anticipate concluding similar settlements with other companies to ensure that life insurance and annuity beneficiaries receive the benefits to which they are entitled,” stated Insurance Commissioner Kevin McCarty.
“This settlement with MetLife is another important step in correcting a long-standing practice within life insurance companies that was not in the best interest of their customers,” CFO Atwater said. “This agreement sends a strong message that Florida will always stand up for its consumers. Companies doing business in this state should expect to operate by the highest ethical standards and will be held accountable. I’m eager to begin reuniting deserving Floridians with the dollars that they are rightfully owed.”
"Life insurance companies must do their due diligence to locate beneficiaries and pay them the amount agreed upon between the company and the policyholder. In this settlement, MetLife agreed to take the appropriate steps to identify beneficiaries," stated Attorney General Pam Bondi.
The practice addressed in this agreement involves life insurance companies determining an insured has died by comparing policyholder records to the Social Security Administration’s Death Master File. Many companies have used this method to stop annuity payments, but have not used the same method to issue life insurance payments. MetLife has agreed that it will do frequent comparisons of its policyholder information to the Death Master File and if it finds that an insured has died, it will either pay the beneficiary or send the policy benefit to the appropriate unclaimed property department within one year. The Florida agreements and orders apply to life insurance annuity contracts, and retained asset accounts held by MetLife. The agreements are expected to result in payments totaling more than $200 million.
When an insured or beneficiary cannot be located, the insurance company is responsible for reporting and remitting the monetary value of the policy to the insured’s state department of unclaimed property. During Jeff Atwater’s tenure as CFO, the Bureau of Unclaimed Property has seen record returns, reuniting owners, heirs and businesses with more than one-third of all money returned since the beginning of the program, due largely to aggressive efforts to contact owners. There is no statute of limitations on unclaimed property, and citizens have the right to claim their property, or the earnings derived from their abandoned property, any time at no cost.
This agreement represents a dramatic change in the view of life insurers and a willingness to make efforts to find lost policies. The agreement does not change the underlying insurance policy and companies can still require beneficiaries to submit a death claim as provided by the policy and state laws. In this agreement, though, the companies are stepping up to make extra efforts to find people if they do not receive a claim soon after they have an indication that the insured may have died.
In early 2011, the National Association of Insurance Commissioners (NAIC) formed the Investigation of Life/Annuities Claim Settlement Practices Task Force chaired by Commissioner McCarty to guide and coordinate the multistate examination process, and conducted public hearings in Florida and California in May 2011 on this issue. Both Prudential Insurance Company of America (Prudential) and its affiliates along with the John Hancock Life Insurance Company (John Hancock) have already reached similar agreements with the Office, DFS and the AG.
The states of Florida, California, Illinois, North Dakota, New Hampshire and Pennsylvania are serving as lead states for examinations of the largest insurance companies. During this stage of the Task Force’s work, the focus has been on the largest 40 insurance groups, which comprise more than 92.4% of the market for life and annuity products nationwide.