State Reaches Settlement with Life Insurance Companies

State Controller John Chiang announced multi-state settlements over unpaid life insurance benefits with 11 life insurance companies, including Transamerica and New York Life. The Controller’s five-year investigation revealed an industry-wide practice of failing to pay death benefits to beneficiaries and ignoring a legal duty to turn the money over to the State for safe keeping.

Instead, companies would draw down the policies’ cash reserves to continue collecting premium payments from the deceased and then cancel the policy once the cash reserves were depleted. Also, insurers did not routinely crosscheck the owners of dormant accounts with government databases of the deceased. In other cases, companies had direct knowledge of the policy owner’s death, but still did not notify the beneficiaries of the policy. The companies have agreed to make policy beneficiaries whole, pay 3% compounded interest, and adopt business procedures to ensure full compliance with the unclaimed property laws. California’s 50-year-old consumer protection law requires businesses to send lost or abandoned properties to the State after three years of inactivity. These multi-state settlements are worth up to $763 million nationwide, with up to $86.7 million going to California beneficiaries.

Companies involved in the latest settlements include Transamerica, New York Life, Western & Southern, Pacific Life, Genworth, Hartford, ING, Symetra, Northwest Mutual, Sammons (Midland and North American), and TIAA-CREF.

Like previous settlements, the agreements announced require the companies to do the following:
• Restore the full value of all effected accounts dating back to 1995.
• Fully comply with California’s unclaimed property laws and cooperate with the Controller’s efforts to reunite these death benefits, annuity contracts, and retained asset accounts with their owners or, in many cases, the owners’ heirs.
• Pay beneficiaries 3% compounded interest on the value of the held amounts from 1995, or from the date of the owner’s death, whichever is later. To date, Controller Chiang has reached global settlements with 18 life insurance companies, with an aggregate value of $266.7 million belonging to California beneficiaries, and an estimated $2.4 billion nationally. These 18 companies write more than 50% of all the issued and active life insurance policies nationwide.

Last Updated 09/16/2020

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