Death Master Report

4 II. Public Hearing Very early in his first term, Commissioner Jones convened a public hearing which investigated and exposed the failure of life insurers to use the Death Master File to identify deceased policyholders and to pay their life insurance beneficiaries. On May 23, 2011, Insurance Commissioner Dave Jones and State Controller John Chiang conducted a joint investigative hearing into the practices of Metropolitan Life Insurance Company (MLIC), also known as MetLife. The hearing focused on MetLife’s practices regarding payment of benefits under life insurance policies after MetLife learns of an insured’s death either to the beneficiaries or, if insurers cannot locate them, for three years or more, to the State’s Unclaimed Property program. The Commissioner and the Controller conducted the hearing based on preliminary findings from an audit the Controller launched in 2008, indicating that for two decades, MetLife failed to pay life insurance policy benefits to named beneficiaries or the State even after learning that an insured had died. The company had a huge number of so-called Industrial Policies, valued at an estimated $1.2 billion, which it primarily sold in the 1940s and 1950s to working-class people. The payments, which MetLife collected weekly, typically were higher than the final death benefit. The Controller’s unclaimed property audit indicated that MetLife did not take steps to determine whether policy owners of dormant accounts were still alive, and if not, pay the beneficiaries, or the State if it could not locate them. Simultaneously, the preliminary findings showed that MetLife knew, from its access to the Death Master File, that an owner of an annuity contract - which generates income for the policy owner at the time the annuity matures - had died, or the annuity had matured, the company terminated the annuity. However, it did not simultaneously use the Death Master File to determine whether its life insurance policyholders died so that it could contact the life insurance beneficiaries and pay them. Even worse, following the deaths of life insurance policyholders, MetLife continued withdrawing premium payments from the life insurance policy holder’s account until the cash reserves were used up and then canceled the policy. Upon learning that life insurers with access to the Social Security Administration’s “Death Master File” were not using information about deaths to trigger payments to life insurance beneficiaries, Commissioner Jones and four other lead insurance regulators launched examinations of the 40 largest life insurance groups. The examinations determined whether these insurers violated state insurance laws by engaging in unfair claims settlement practices. Only four of these insurers were deemed in compliance. The top 40 insurers were based on 2010 NAIC Annual Reports for Direct Life, Annuity and Other Considerations. 1