States say insurers should be making a greater effort to find heirs to ensure payments are being made.
Life insurance companies have paid beneficiaries billions of dollars in unclaimed policy payouts. That said, if many states are successful, it could mean that even more beneficiaries will be receiving funds.
Certain state actions aim to force insurance providers to make a greater effort to locate heirs.
Almost two dozen states have passed laws pushing life insurance companies to look for policy beneficiaries. Among them, Illinois has become the most recent state to consider a law that would force insurers to seek out heirs. These state laws have arrived on the heels of investigations run over several years. The investigations looked into the largest 40 life insurance firms.
The investigations determined that many insurers held onto benefits payouts even when they had been advised of the death of a policyholder. By the time of the writing of this article, twenty insurers had already reached settlements with states.
Now, some life insurance companies are pushing back against the audits and the laws to force them to find heirs.
Life insurance providers under the ownership of Kemper Corp. have been seeking to stop the law from passing in Florida. They have also been strongly opposed to the proposal currently being considered in Illinois. The latter bill is approved in terms of the lawmakers in the state. However, it must still receive Governor Bruce Rauner’s nod before it will be passed into a law.
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Kemper’s subsidiaries have filed lawsuits against the chief financial officer in Florida and the state treasurer in Illinois. Those lawsuits state that beneficiaries must make a claim in order to receive their benefits. This is laid out within the policy contracts, say the subsidiaries.
A statement from Kemper said “If states can interfere with existing contracts, it is a bad precedent for consumers and the companies that serve them and violates the U.S. and state constitutions.”
The majority of laws for life insurance companies have been based on a model created by the National Conference of Insurance Legislators. That model is approved by the American Council of Life Insurers. That council is an industry group with members including Nationwide, Prudential, MetLife and other large insurers.