11 Million has been recently paid out in claims. Do life insurance companies to use the Social Security Administration's list of recently deceased people to stop making annuity payments to dead customers, and use the list to check whether any life insurance policyholders have died, and have there been issues with this?
Yes, life insurance companies often use the Social Security Administration's Death Master File (DMF) or similar databases to identify deceased individuals and stop making annuity payments or initiate the claims process for life insurance policies. The DMF is a comprehensive list of individuals who have died and is regularly updated with information from various sources, including death records from state vital statistics offices.
Using the DMF or similar databases helps life insurance companies identify policyholders who have passed away so that they can fulfill their obligations and make payments to beneficiaries or stop making payments when necessary. This process is commonly referred to as "matching" or "scrubbing" the policyholder database against the DMF.
However, there have been instances where life insurance companies have faced scrutiny and legal action for not adequately searching the DMF or taking appropriate action when policyholders die. In some cases, insurance companies have been accused of delayed or denied claims, particularly if they did not proactively initiate contact with beneficiaries after the death of the policyholder.
Historically, some insurance companies have been found to engage in practices known as "retained asset accounts" or "checkbook policies." In these cases, instead of immediately paying the death benefit to the beneficiaries, the insurance company establishes a retained asset account or issues a checkbook tied to the benefit amount. This allows the beneficiaries to access the funds while keeping the remaining balance with the insurance company, potentially earning interest for the insurer. Such practices have faced criticism and legal challenges due to concerns about transparency and the beneficiaries' access to their full benefits.
In response to these issues, regulatory authorities and legislators have implemented measures to address the problem of unclaimed life insurance benefits. Some states have enacted laws requiring life insurance companies to regularly search the DMF or similar databases and make efforts to locate beneficiaries proactively.
It's worth noting that the life insurance industry has made significant efforts to improve practices and ensure timely payment of claims. Insurance companies are now subject to more stringent regulations, and many have implemented robust procedures to identify deceased policyholders and pay benefits promptly to beneficiaries.