A total of 19 states and Washington, D.C., reached an agreement with The Prudential Group, one of the largest life insurance companies in the U.S., in a case involving its unclaimed property practices.
Massachusetts State Treasurer Steven Grossman said in a statement that the agreement forces Prudential to better cross-reference its policy database with public death records to ensure people entitled to death benefits receive them “in a timely and appropriate manner.”
He added that the settlement, which does not include a fine, “will undoubtedly result in improved insurer accountability and business practices in Massachusetts and across the country.”
In March 2011, Grossman obtained a similar agreement from John Hancock Life Insurance Co. following an audit of its life insurance policy practices. That effort has already resulted in the the state taking custody of more than $20 million in policy proceeds, an amount that will grow as Hancock continues to cross-reference its policy database with public death records. Grossman’s office will be working in the coming months to distribute proceeds to their rightful owners.
Other large life insurance companies in the U.S. undergoing similar investigations, which will likely lead to additional settlements, Grossman said.
States involved in the Prudential settlement include California, Colorado, Idaho, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Montana, Nebraska, North Dakota, Oregon, Pennsylvania, South Dakota, Tennessee, Utah, Vermont, Washington and Wisconsin, as well as Washington, D.C.
California State Controller John Chiang said in a separate statement that Prudential and John Hancock settlements stem from a 21-company audit he initiated in 2008 to determine the insurance industry’s compliance with state unclaimed property laws.
The audit revealed “an industry-wide practice” of companies failing to pay death benefits to the beneficiaries of life insurance policies, Chiang said. Instead, companies would draw-down the policies’ cash reserves in order to continue collecting premium payments from the deceased. Once the cash reserves were depleted, the company would cancel the policy. The audits also found that insurers did not routinely cross-check the owners of dormant accounts with the Social Security Administration’s Death Master File and other government databases listing deceased individuals. In other cases, the company had direct knowledge of the death of a policy owner, but still did not notify the beneficiaries, according to Chiang.
California beneficiaries of Prudential life insurance policies could see up to $20 million, Chiang said.
Under the settlement, according to Chiang, Prudential Financial and its predecessors and subsidiaries (Prudential Insurance Co. of America, Pruco Life Insurance Co., Pruco Life Insurance Co. of New Jersey, Prudential Retirement Insurance and Annuity Co., and Prudential Annuities Life Assurance Corp., formerly known as America Skandia Life Assurance Corp.) must restore the full value of affected accounts; Fully comply with California’s unclaimed property laws and cooperate with the controller’s efforts to reunite millions of dollars in death benefits and matured annuities with their owners or, in many cases, the owners’ heirs; and pay the beneficiaries 3% compounded interest on the value of the held amounts from the date of the owner’s death or January 1, 1995, whichever is later.
Grossman said in his statement that the Prudential case began in June 2008, when Massachusetts authorized audits to review the insurance industry’s compliance with unclaimed property laws.
The audits uncovered millions of dollars in unclaimed death benefits, which were paid either directly by Prudential for by the state’s unclaimed properties office, according to Grossman.
“This agreement shores up the trust that those who have passed placed in their insurance company, and it ensures that policy proceeds will go to their intended use,” Grossman added.
The Prudential and John Hancock agreements represent “significant milestones” in Massachusetts’ multi-year effort to audit the U.S. life insurance industry for withheld funds and unclaimed property, Grossman said.
In addition to the unclaimed property identified by these audits, the Massachusetts Treasury also maintains a comprehensive list of about $2 billion in unclaimed monetary property such as stocks, un-cashed checks, refunds, and bank accounts. Individuals can search to see if they own such property at www.findmassmoney.com or by calling (888)344-MASS.
States make Prudential alter its unclaimed life insurance practices via IFAwebnews.com .
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