Posted on Friday, 20th January 2012 by Keane Unclaimed Property Team
In recent months, the life insurance industry has experienced an increased level of scrutiny, as two individual states have proposed legislation that mandates stronger beneficiary location requirements, as well as the use of the Social Security Administration Death Master File (DMF) to identify deceased policy holders and potential decedents. Despite many proposals and discussions, there is still debate around the question of when an insurer is obligated to pay out any benefits. However, insurers such as John Hancock and Prudential have reached settlements with various states to establish a process for identifying deceased owners and paying out policies to the beneficiaries who had not previously contacted the insurers. If unable to locate beneficiaries within the allotted timeframes, the companies are required to report the policy proceeds to the states as unclaimed property.
While the DMF continues to be the most robust and reliable resource for verifying deceased policy owners, the amount of data included within the DMF will be decreasing. As of November 1st, the Social Security Administration (SSA) stopped disclosing any records it acquires from the states to insurers or the general public. This information will only be available to federal agencies in the future. To put this in perspective, of the 2.8 million deaths reported to the DMF annually, only 1 million of those records will be available to the general public going forward. The SSA has not identified the specific reason for these limitations, but there are several factors involved. Although the DMF has been in existence since 1980, it was only recently discovered that the SSA is prohibited from disclosing the death records it receives from individual states. Another contributing factor is the increased misuse of the DMF for identity fraud purposes.
Despite these new limitations which reduce the “completeness” of the Death Master File, the DMF will continue to be viewed as the standard and insurance and unclaimed property regulators are likely to continue requiring its use. Specifically, it is very likely that more states will follow the lead of Kentucky and Tennessee to mandate the use of the DMF to verify potential beneficiaries, as suggested in model legislation created by NCOIL in November. So, while the DMF will continue to be a valuable and required resource for the life insurance industry, it is important for insurers to identify alternative sources and verification methods to more fully identify the population of deceased owners. As an outsourced solutions provider, Keane leverages a variety of resources and methodologies that go well beyond the DMF to identify deceased owners and locate beneficiaries across multiple industries. Check back in the coming weeks, as the ongoing review and analysis of the life insurance industry continues.
Click here to go from New Limitations to the Death Master File back to the Blog
