Lawmakers in the U.S. are battling over billions of dollars in unclaimed life insurance benefits. A number of states have stepped into the legal arena, hoping to lay claim to the money. Technically, the money belongs to beneficiaries, but states have laws that impose statutes on how long benefits can go unclaimed. The money presents an enticing opportunity for states that have dangerously thin wallets. California, in particular, has been aggressive in their pursuit of these funds.
The state, after meandering through the legal process, is now pressuring insurance companies to relinquish the money in accordance with California’s unclaimed property laws. Currently, there is $33 billion up for grabs, all of which is free from interest. Faced with the threat of a $15.4 billion deficit for the next fiscal year, California stands to make a significant profit if it is successful in claiming that money.
The amount of money up for grabs in California begs the question: Where did it all come from? Many insurers chalk it up to logistics failings. Sometimes, benefits fall through the cracks and companies lose track of policyholders, or in this case beneficiaries. A recent audit from the State Controller’s office found that insurers do not cross-check inactive accounts with the Social Security database to see whether the policyholder is, in fact, deceased.
While insurers typically conform o the regulations of the state, some legislators say that more can be done. Bridgeland says that “there should be more incentive to go a little bit above and beyond,” for insurers.
