MetLife to pay millions in multistate settlement

By Maryalene LaPonsie on May 16th, 2012

As part of a recently announced settlement, MetLife will pay state insurance commissions $40 million, and pay up to $500 million to beneficiaries in life insurance benefits. In addition, the company has promised to change how it identifies deceased life insurance policyholders and their beneficiaries.

The settlement comes after state insurance commissioners raised concerns about industry-wide business practices. According to commissioners, life insurance companies have improperly withheld death benefits that are due to policy beneficiaries.

MetLife is just the latest company to settle with commissioners regarding this issue. Earlier in the year, Prudential agreed to pay $17 million to state insurance departments as part of a similar multistate settlement.

MetLife to reform business practices

The settlement includes payments to both states and life insurance beneficiaries. Participating state insurance commissions and departments will share a $40 million payment from MetLife. In addition, the company has promised to make business changes that could result in up to $500 million being distributed to beneficiaries of already deceased policyholders.

Going forward, MetLife will be required to use the Social Security Death Master File or a similar database on a monthly basis to identify deceased policyholders. Once a deceased policyholder has been identified, the insurer must use both its account records as well as online search tools to locate and notify the beneficiary. If the beneficiary has not been located within a year, the death benefit must be transferred to the appropriate state as unclaimed property.

27 states join settlement

The case against MetLife was initially pursued by six states:

  • California
  • Florida
  • Illinois
  • New Hampshire
  • North Dakota
  • Pennsylvania

Since the settlement announcement last month, 27 states have agreed to participate. Additional states can join the settlement through June 29. States not participating may retain the option of pursing a separate case against MetLife should they choose.

Accurate beneficiary information vital

Although the MetLife settlement will result in the company searching more diligently for deceased policyholders and their beneficiaries, it also highlights the importance of regularly updating policy information.

For both term life and whole life insurance plans, policyholders should review their accounts on a regular basis to update beneficiary information. In particular, beneficiary data may need to be amended after milestones such as a wedding, divorce or birth of a child. Providing accurate information and current addresses and phone numbers can help ensure a life insurance company can contact a beneficiary quickly if needed.

Maryalene LaPonsie
Maryalene LaPonsie has been writing professionally for more than a decade on topics including education, insurance and personal finance. She holds a Bachelor's Degree in Political Science from Western Michigan University.

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