Prudential has agreed to pay a penalty of $14 million to compensate for the payments it did not make.
Following a Department of Commerce review of Prudential life insurance policies in Minnesota in which no claims had been made following the deaths of the policyholders and where no benefits had been paid out, the insurer has agreed to a settlement, this week.
The settlement is reported to be for $14 million and was first announced in the middle of the week.
Prudential and the state of Minnesota were able to come to an agreement regarding “how the company should put in place the safeguards to ensure the life insurance funds reach their rightful owner.” This, according to the commissioner of the Commerce Department, Mike Rothman.
The life insurance settlement includes a payment for the claimants owed and for the state itself.
The total of $14 million is made up of a life insurance settlement payment to cover the $13 million that Prudential said could be owed to claimants within the time period from 1986 to 2010, in addition to a payment of $1 million to the state.
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The reason that Prudential had to come up with this settlement was that the Commerce Department stated that when it looked into the insurer’s life insurance records, in a number of cases, “policy holders had died but no claims had been made, revealing Prudential’s inability to identify and contact policyholders or their beneficiaries upon the determination of a death.”
This settlement will also mean that the insurer will need to change the way that it handles these issues with their life insurance policies in the future. It will now need to make certain that its own records are accurate when compared against those from Social Security numbers and birth dates, in order “to ultimately connect beneficiaries with their money.”
Moving ahead, they will be required to make reforms that are forecasted to benefit approximately 158,000 current policyholders with Prudential, as well as their beneficiaries within the state of Minnesota. This figure was released by the Commerce Department at the same time as the announcement of the life insurance settlement that had been reached.