60 Minutes: Life insurers systematically don't pay unless beneficiary comes forward
On Sunday night (April 17), 60 Minutes aired a segment called “Not Paid” about life insurers systematically failing to pay beneficiaries unless a claim is made – even if they are aware the insured has died, and that some insurers have even drained the cash value in whole life policies of policyholders they know are deceased before terminating them.
“Audits of the nation’s leading insurance companies have uncovered a systematic, industry-wide practice of not paying significant numbers of beneficiaries,” 60 Minutes Correspondent Lesley Stahl says in the intro to the 14-minute segment. “In a little-known series of settlements, 25 of the nation’s biggest life insurance companies have agreed to pay more than $7.5 billion dollars in back death benefits. However, about 35 life insurance companies have not settled, and remain under investigation for not paying when the beneficiary is unaware there was a policy – something that is not at all uncommon.”
• Watch the 60 Minutes segment here
The segment shows the logos of the 25 companies that have settled with the states, noting that they admitted no wrongdoing but agreed to pay out the more than $7.5 billion directly to the unpaid beneficiaries or to the states, which then try to find the beneficiaries by phone or online.
Here are the 25 companies that have settled (in no particular order):
Sun Life Financial
New York Life
Lincoln Financial Group
Western & Southern Financial Group
Jackson National Life
The segment features an interview with Florida Insurance Commissioner Kevin McCarty, who it says led the investigation. Florida very recently passed a law requiring insurance companies to use the Social Security Death Master File (DMF) to track when policyholders die, and then must proactively contact the beneficiary to instigate the claims process. McCarty says many states have similar laws, which put the onus on the insurers to pay out claims when they know a policyholder has died instead of on the beneficiary – who in many cases has no idea the deceased had a life insurance policy naming them as a beneficiary.
McCarty says the investigation found that in many cases the companies have had knowledge about the policyholder’s death in their actual files, yet they have neglected to initiate an investigation and pay the claim. He said upon finding this out, his first reaction was a desire to “punish them for the unconscionable, indefensible behavior that was going on.”
The segment mentions that insurance industry lobbyists argue that the burden falls on the beneficiaries, who are obligated to know what’s in the contracts they enter into.
As the investigators brought the issue to various state treasurers, the treasurers all reacted similarly in that, “This shouldn’t be allowed to happen, and we have to fix it.”
The segment goes on to say that many insurers would use knowledge of a policyholder dying only to their advantage – for example stopping annuity payments, but not paying life insurance death benefits to a beneficiary unless a claim is made and even canceling policies for nonpayment of premiums.
Thoughts or comments on the 60 Minutes piece and the issue? Please visit these threads:
Next page: Draining cash values
- Political reaction: Republicans propose The American Health Care Act
- State Farm reports $1.2 billion pre-tax operating loss in 2016
- Why prospecting fails and what to do about it
- DOL aims for initial 60-day delay in fiduciary rule effective date
- Report aims to put a stop to ‘Use It and Lose It’ homeowner policies
- Most LTCI claims begin and end at home; insurers pay out $8.65 billion in 2016 claims, new data confirms
- Record-setting fixed, FIA sales in 2016 can’t keep overall annuity sales from 6% decline
- 2nd annual ‘Insurance Careers Month’ trumpets fact 93% are proud to work in the industry; rallies recruiting efforts