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MetLife under pressure to identify deceased life insurance policyholders

By Maryalene LaPonsie on October 21st, 2011

As state regulators take a closer look at life insurance claims procedures, MetLife has announced its third-quarter financial statement will include a $115 million to $135 million charge for death benefits that may be payable, according to a Bloomberg report.

The nation's largest life insurance company made the decision in the wake of several state investigations into whether insurers have failed to appropriately check the status of policyholders.

$1 billion in unclaimed funds

According to regulators in states such as New York, Florida and California, life insurance companies aren't doing enough to identify deceased policyholders and pay out claims in a timely manner.

In May, the Florida Office of Insurance Regulation held a public hearing to consider settlement claims practices within the life insurance industry. At the time, Florida Commissioner Kevin McCarty said insurance companies may be holding up to $1 billion in unclaimed funds.

Meanwhile, the California Department of Insurance held its own hearing in May to investigate whether MetLife failed to pay benefits even after it became aware of a policyholder's death.

Procedures to pay life insurance claims

While term life coverage ends at the conclusion of the insurance period, whole life policies may be payable even after premium payments have ceased. Life insurers generally are required to pay out a policy's benefits once they are notified of the death and receive a valid death certificate.

When no notification is made, insurance companies can hold the money until three to five years after the policyholder's 100th birthday, depending on the state. After that time, the funds are considered unclaimed property and forwarded to the appropriate government office.

In MetLife's case, its compliance with unclaimed property laws has reportedly been under investigation in 30 jurisdictions. In the meantime, MetLife has said it will tie a $135 million charge to its reserves to pay out the claims for potentially deceased policyholders.

AIG took similar action in August when it made changes to its identification procedures and subsequently charged $100 million to its reserves.

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