In the summer issue of LIMRA’s Regulatory Review, Keane’s own Valerie Jundt provides guidance on unclaimed property for insurance companies. Unclaimed property compliance continues to be a hot-button issue for insurance providers, as multiple states have recently passed beneficiary search and location regulations. These regulations came about as a result of state inquiries into insurance industry practices of utilizing the Social Security Administration’s Death Master File (DMF) and actively locating beneficiaries when benefits are due.
In an effort to help companies comply with new state regulations, as well as maintain compliance going forward, Ms. Jundt suggested that insurers implement these procedures into any existing compliance process:
1. Evaluate the quality of policy data
One of the biggest challenges insurers face is the quality of their own policy owner and beneficiary data. Insurers can improve the outcomes of their DMF analysis by tackling these data complexities head on and carefully evaluating, categorizing, separating, and enhancing data as a first step. In doing so, an insurer can enhance the effectiveness of life status assessments, strengthen policy owner/beneficiary location efforts, and make sure that property is reported timely and accurately to the correct state, if necessary.
2. Compare policies against the Death Master File
A key component of the new beneficiary location regulations, insurers are now required to compare their list of policy owners to the Social Security Death Index (SSDI) or an equally comprehensive service to identify who is living and who may be deceased. This process should always include a step to verify the name and/or Social Security Number (SSN) of the policyholder to reduce the risk of mistakes. Keane has observed that when simply comparing SSNs on policies to the SSNs on the DMF, up to 10 percent of deceased “hits” that come back can be false positives. In most cases, this results from typographical errors or outdated information on either the insurer’s records or within the DMF.
A best practice to combat this is to confirm additional criteria — such as date of birth or address — in addition to the SSN when conducting DMF searches. A multi-faceted DMF search like this provides results that are measurably better than those stemming from a simple SSN comparison. In the absence of an SSN, incorporating additional data points into the analysis is a virtual necessity to validate the results of the life status search.
3. Locate and contact beneficiaries
The newly required DMF searches will likely highlight hundreds, if not thousands, of policies that have deceased owners. All of these accounts are at risk of becoming unclaimed property for insurance companies and ultimately being turned over to the states — unless the beneficiaries can be located and notified of the account in time to claim the policy proceeds.
Unfortunately, there may be a very short window of time in which to locate and communicate with beneficiaries and complete the claim. It is crucial that insurers plan and prioritize their location and outreach initiatives because failing to reconnect with beneficiaries results in lost opportunities. The goal should be to keep policy proceeds invested, build goodwill with potential new customers, and fulfill the original intent of the policies.
4. Turn unresolved accounts over to the states
If beneficiary search and location efforts have been exhausted and the correct individuals cannot be contacted, insurers are required to escheat the benefits from the policy or retained asset account, plus any applicable accrued interest, to the state of the owner’s last known address. The rules vary by state, so be sure to enlist the help of a trusted consultant or develop strong internal controls to handle the process in-house.
As general guidance, insurers should be routinely reviewing and updating their compliance processes. The rules will continue to evolve, making it important to keep abreast of relevant changes going forward. Further, they should make sure their information systems properly capture and address all requirements. Insurers may find that an independent and enterprise-wide review of their current unclaimed property procedures is valuable in ensuring that its people, systems, and procedures are “audit ready.”
You can view the article in its entirety in LIMRA’s Summer Issue of their Regulatory Review. You can view the online PDF by clicking here.