Life insurance company to pay up
October 11, 2012
• Beneficiaries to share in $3 Million
• “Pretending they don’t know the policy holder has died”
Nationwide Insurance Company has agreed to pay an estimated $3 million to California beneficiaries of its life insurance policies, says state Controller John Chiang.
Mr. Chiang began auditing insurance company practices in 2008, revealing an industry-wide practice of companies failing to pay death benefits to the beneficiaries of life insurance policies, despite having access to federal records indicating that policyholders had died, or direct confirmation from relatives of the deceased.
Instead, some companies would continue collecting premium payments from the deceased by drawing down the policies’ cash reserves. Once the cash reserves were depleted, the company would cancel the policy.
However, says Mr. Chiang, since the audits of national companies began, Nationwide has been “diligently contacting” Californians who are owed benefits. To date, Nationwide has paid more than $11 million in unclaimed death benefits on annuity contracts to at least 346 California beneficiaries, he says.
The company has also paid more than $1.5 million in life insurance benefits to 131 California beneficiaries.
“I commend Nationwide for stepping up and doing right by its customers,” says Mr. Chiang. “People purchase life insurance policies for a reason: they want to make sure their loved ones are taken care of after they are gone, and it is deplorable that these companies refuse to pay beneficiaries by pretending they don’t know the policy holder has died.”
Since the Controller’s audits began, Nationwide is the fifth insurance company to settle with the state, resulting in approximately $108 million being returned to California beneficiaries. Earlier this week, the Controller signed a multi-state settlement with Forethought Group Inc., a company that sells end-of-life policies through funeral planners, which will return $25 million to California beneficiaries.
Today’s settlement requires Nationwide and its subsidiaries to do the following:
• Restore the full value of impacted accounts;
• Fully comply with California’s unclaimed property laws and cooperate with the Controller's efforts to reunite millions of dollars in death benefits and matured annuities and other policies with their owners or, in many cases, the owners' heirs;
• Use the date of death as reflected in the Social Security Administration’s Death Master File to establish the start of the three-year unclaimed property dormancy period.
• Pay the state of California 3 percent compounded interest on the value of the held amounts from 1995, or from the date of the owner’s death, whichever is later, for failure to comply with unclaimed property laws.