California Insurance Commissioner Dave Jones announced today that the California Department of Insurance has, with other state insurance regulators, reached a settlement agreement with New York Life Insurance Company over the insurer's use of the Social Security Administration's Death Master File database to ensure policyholders and beneficiaries are protected.
New York Life has agreed to a number of business practice reforms, including using the Death Master File database (DMF) to search its records for deceased life insurance policyholders so that its beneficiaries may be paid. In addition, New York Life agreed to pay $15 million to insurance regulators. The principal lead state in this investigation was California, with support from insurance regulators from Florida, Illinois, New Hampshire, North Dakota and Pennsylvania.
“This agreement advances our nationwide effort to reform life insurance industry practices regarding the use of the Death Master database,” said Commissioner Jones.
For many years, life insurers have used the DMF to search for and stop payments to annuity holders, but did not use the database to identify their own deceased life insurance policyholders whose beneficiaries are owed life insurance proceeds. It is estimated that through this practice, insurers avoided paying billions of dollars in life insurance proceeds to beneficiaries and also failed to turn over unclaimed proceeds to state controllers throughout the United States. New York Life has demonstrated that it has been using the DMF symmetrically with quarterly DMF runs since regulators commenced examinations in 2011.
New York Life ranks third in sales of life insurance and annuities with over $21 billion in annual premiums. With the New York Life agreement, life insurers representing over 50 percent of the total national market have conformed or agreed to reform their business practices and use the Death Master to search for deceased policyholders and make benefit payments.
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