Life Insurance Settlement Forces Companies to Pay Up

California State ControllerJohn Chiang recently reached multi-state settlements over unpaid life insurancebenefits with eleven life insurance companies. 

These settlements, wortharound $763 million nationwide, resulted from a five-year investigation byChiang into the compliance of life insurance companies with state unclaimedproperty laws.  Chiang found anindustry-wide practice of failing to pay death benefits to beneficiaries,ignoring their duty to turn the money over to the state, and withdrawing allcash reserves before cancelling the policy.

These eleven companies,including Transamerica and New York Life, must now “make each of their policybeneficiares whole, pay 3% compounded interest, and adopt business proceduresto ensure full compliance with the Unclaimed Property laws.”

See Wrongly Withheld Benefits to Be Paid toFamilies of Deceased Owners, The Wall Street Journal, June 7, 2013.