Life Insurance Companies in New York Pay Out $52 Million

Life insurance regulators in New York have succeeded in getting insurance companies doing business in the state to look through their financial records in search of life insurance policy holders who may have died. Under normal operating procedures, the families of those who have died inform the company of these deaths, after which death benefits can be paid. However, what happens when the family is unaware of the life insurance policy at all or when they have lost the relevant paperwork and do not know which insurance company their loved one had a contract with?

In such cases, the beneficiaries may not get the death benefit they are entitled to. Aware of this problem, New York regulators recently began demanding that life insurance companies become more proactive about notifying beneficiaries when a benefit is due. The life insurance companies themselves have access to databases of deaths. These databases originate with the federal government and give the companies some ways to identify the passing of policy holders – ways that do not depend on beneficiaries to know about the life insurance policy in effect.

Results of the Regulators’ Push

As a result of the regulators’ diligence in this area, almost 8,000 individuals who would not otherwise have seen policy proceeds have been furnished with the money to which they are entitled by the terms of the life insurance contract signed by their loved ones. In all, more than $52 million has been paid out to date, with the average payment exceeding $6,500.

This last figure illustrates an interesting facet of the problem. The average award was rather small because it is families who hold smaller policies that are more likely to “lose track” of them decades after they were first purchased. This makes eminent sense when one considers that lower-income Americans are precisely the ones least likely to be working with lawyers or financial advisers when setting up their retirement or other assets. Such Americans arrange matters on a “do-it-yourself” basis, but this approach relies in many cases on family memory to keep dates and details straight.

The New York regulators have thus been instrumental in helping mainly lower-income Americans receive their rightful due. At a time of such economic uncertainty, with many Americans out of work, the money has no doubt been very welcome for these individuals.

Benjamin M. Lawsky, who serves as the superintendent of the Department of Financial Services for the state of New York, commented on the regulators’ efforts, clearly pleased that so many beneficiaries have been notified of the benefits due to them. “Our findings clearly show that matching life-insurance policies against a comprehensive list of recent deaths is essential to ensure that all beneficiaries receive the benefits they are owed them.”

A Matter of Fairness

For many, the issue boils down to simple fairness. The New York insurance companies in question do use federal databases of deaths when they want to ascertain which retirement-income benefits should be stopped because the policy holder has died. It only seems right and just that they use this same information when it pertains to paying out money for death benefits as well.