Companies in the state were not adequately seeking beneficiaries are now paying out.
Auditors in Vermont have determined that many of the life insurance companies in the state were not being adequately aggressive to seek out the beneficiaries of policyholders that had died, and steps have now been taken to remedy that trend.
This has meant that many beneficiaries were not receiving the payments that were due to them.
A number of large life insurance companies in Vermont, such as Lincoln Financial, Prudential, and AIG, have each reached settlements with this state and several others in which they operate, and have agreed to improve their standard practices for finding beneficiaries. Beyond this, however, many state legislatures have also started to build new laws to prevent this type of situation from recurring.
Vermont and a number of other states have passed life insurance laws that lay out the steps insurers must take.
These laws specifically describe what life insurance companies must do in order to locate the individuals to whom money is owed when a policyholder has died. The National Conference of State Legislatures has said that there have been eight states that have passed this type of legislation since last year. These include Kentucky, Montana, Alabama, New York, New Mexico, Maryland, North Dakota, and Vermont.
The new law in Vermont says that life insurance companies are obligated to:
• Check their own policyholder databases against a master nationwide Social Security database to find out if a policyholder has died and that the policy must then be paid to a beneficiary.
• Make an effort in “good faith” to seek out that policyholder within 90 days to verify what was determined in the database comparison search.
• Make an effort in “good faith” to find the beneficiary of the policyholder if the death is verified.
• If the beneficiary cannot be found immediately, the payout for the policy must be sent to the unclaimed property division of the office of the state treasurer. The state will then continue to look for the life insurance beneficiary using its own resources on the insurer’s behalf.