MetLife Inc. may have to pay up to $500 million over its handling of death benefits from life insurance policies issued decades ago.
The deal, part of a multistate probe headed by Florida insurance investigators, also requires MetLife to improve its system for identifying unclaimed life-insurance policies.
For many years a number of insurance companies have selectively used the Social Security 'Death Master' file to cut off payments to annuity holders, but did not use that same database to identify deceased life-insurance policyholders to initiate payment of claims, said Florida Insurance Commissioner Kevin McCarty in a conference call on Monday.
In its statement Monday, MetLife said it paid about $12 billion in death benefits in 2011 and its records indicate that more than 99 percent of death-benefit claims "are submitted by beneficiaries and routinely paid in a timely and accurate manner."
The settlement involves approximately 708,000 policies nationwide issued between 1900 and 1963.
There were at least 15,000 Industrial Life policies -- typically covering burial expenses that were once sold in weekly, monthly or quarterly bases by door-to-door salesmen -- involving Floridians, with a face value of $9 million.
There was no breakdown of the nonindustrial policies, which may account for $100 million to $200 million of the settlement.
The Death Master file is supposed to be used by insurance companies to check on names of people that recently died.
McCarty said the landmark settlement may be the largest settlement in terms of returning money to consumers.
MetLife, the nation's biggest life insurer by assets, now joins Manulife Financial Corp.s John Hancock division and Prudential Financial Inc. in settling disputes over the use of the deceased customers' benefits.
We think the settlement today, along with the Prudential settlement, which was also a local settlement, and the settlement that Florida entered into with John Hancock, these will all encourage companies to settle this, McCarty said.
John Hancock, which like MetLife has denied wrongdoing, agreed to pay $3 million to Florida. Prudential agreed to pay $17 million nationally.
MetLife will also pay $40 million to the states for the cost of their investigation.
"Life insurance companies must do their due diligence to locate beneficiaries and pay them the amount agreed upon between the company and the policyholder, Attorney General Pam Bondi stated in a release.
The agreement is the result of a joint investigation undertaken with insurance departments of Illinois, California, Pennsylvania, New Hampshire and North Dakota.
At least 20 states must sign the agreement. States have until June 29 to sign the agreement to become eligible to receive the settlement distribution.
This settlement with MetLife is another important step in correcting a longstanding practice within life insurance companies that was not in the best interest of their customers, Florida CFO Jeff Atwater stated in a release.
MetLife will have to pay the full value of any account along with 3 percent interest.
Policies issued after 1940 have Social Security numbers, while policies issued prior to 1940 relied more on date of death.
As part of the agreement, MetLife agreed to:
- Adopt business reforms strengthening efforts to locate policyholders and beneficiaries within 120 days of an insured persons death.
- Conduct quarterly matches for a year, and then monthly matches against the Death Master file to check for evidence that a person insured by Metlife may have died. If a match is found, the company will conduct a thorough search for the insured or beneficiaries using databases, mail, telephone calls and email (if available).
- If, within one year, an insured or beneficiary cannot be found, MetLife will report and pay the death benefit or annuity payment to the appropriate unclaimed property department.
- MetLife also agreed to search for insured persons or beneficiaries of low-value or industrial life insurance policies that were sold in the early 1900s up to 1964. Many of these policies were sold in Florida. MetLife is making extra efforts to gather information needed to identify these insureds. The industrial policies alone are estimated to include almost 15,000 Florida policyholders with over $9 million in face value. The face value for national industrial life policies is expected to exceed $400 million.
Consumers can access more information about the MetLife, Prudential or John Hancock settlement agreements by accessing the DFS Division of Consumer Services webpage at: http://www.myfloridacfo.com/consumers/ or the offices webpage regarding the Life Claims Settlement issue.
To search for or claim unclaimed property, visit www.FLTreasureHunt.org, or call 1-88-VALUABLE or (850) 413-3089.
Reach Jim Turner at jturner@sunshinestatenews.com or at (772) 215-9889.
