Insurers Finding Beneficiaries Of Forgotten Life Policies
May 30, 2013 by Mark Williams
By Mark Williams, The Columbus Dispatch, Ohio
May 26–At first, Carol Cheatham thought the telephone call she received in March from Nationwide could be a scam.
A stranger was telling her that she might be entitled to the proceeds of a life-insurance policy that had been bought decades ago.
But he knew intimate facts about her family, including her mother’s name and the cemetery where she has been buried for 30 years.
“How would somebody really know all those details?” Cheatham wondered as she began to believe the call was real.
As it turned out, her mother had purchased a life-insurance policy when she worked for a telephone company in New York City. That was before her father moved the family to Virginia in 1948. Cheatham said she was not aware of the policy.
“I had a feeling through the years that she forgot about it,” said Cheatham, who now lives in Hampton, Va.
Within a month or so of her first contact with Nationwide, Cheatham and her sister, Judith, each received a check from Nationwide for$3,206. They’ve since put the money toward refurbishing their parents’ headstone, which was showing signs of wear after 30 years.
“This is something you see on TV,” Cheatham said, marveling at how Nationwide was able to track her down.
Cheatham is right about the discovery of the long-lost life-insurance policy. Such claims make up a tiny sliver of life-insurance cases.
Though small in number, the cases are getting more attention these days as insurers step up their efforts to track down beneficiaries of policies that had been all but forgotten.
Last fall, in response to an investigation, Nationwide struck a$7.2 million deal with the Ohio Department of Insurance and six other states regarding hundreds of millions of dollars in unclaimed benefits. Other major life insurers such as MetLife, Prudential and John Hancock have made similar agreements.
The deals resolve allegations that insurers haven’t been doing enough to determine whether policyholders had died and to locate their beneficiaries.
“They were certainly interested in taking care of their own accounts instead of some of their customers,” said Jeff Blyskal, a senior editor at Consumer Report s.
Nationwide and other insurers have said they have done nothing wrong, and that the contract between them and their policyholders requires that beneficiaries notify them when there is a death. Generally, claims on benefits are filed within 18 months of a policyholder’s death, industry experts say.
“Thanks to the hard work of the department and my counterparts in several other states, I am confident this agreement will help the company better serve its policyholders now and in the future,” Ohio Lt. Gov. Mary Taylor, who also serves as the Insurance Department director, said when the deal was announced last fall.
The deals require insurers to do more to find beneficiaries when they know or suspect a policyholder has died and to file reports with the state. Typically, that means insurers will use Social Security death records to compare against their list of policyholders. Few policies actually fall through the cracks.
“In almost every case, people come forward and file a claim,” said Eric Henderson, senior vice president of life insurance and annuities for Nationwide Financial. “There are just these rare cases sometimes where (the existence of the policy) doesn’t get communicated.”
Still, that doesn’t mean Nationwide should not be doing more to find beneficiaries, Henderson said.
“It’s important to make sure we find them,” he said.
As part of its stepped-up effort to pay benefits on old policies, Nationwide said it had identified about 4,000 life-insurance policies with an estimated average death benefit of$8,300. It also has found about 7,000 annuity contracts with an average death benefit of$57,000.
So far, about 3,000 of the life-insurance claims and 5,500 of the annuity claims have been paid, the company said.
In context, Nationwide pays out about$1 billion a year in life and annuity payments. Henderson estimated that the unpaid claims amount to
0.003 percent of all claims.
It’s not clear how much life-insurance money is waiting to be claimed from all the companies. Based on settlements that insurers have reached with states, Consumer Reports calculated that about$1 billion might be owed to about 500,000 beneficiaries, or one out of every 600 Americans.
In some cases, money from policies could have been turned over to states’ unclaimed-funds programs.
Blyskal said few beneficiaries likely will get rich from newly discovered policies. The average benefit is$2,000.
“We all have this fantasy of a long-lost uncle leaving us a fortune,” he said. “I don’t think that will be the case here.”
Searching for beneficiaries of policyholders can be a labor-intensive process, said Mary Jo Hudson, a former state insurance commissioner in Ohio.
There can be mistakes in the death lists that insurers use, such as transposed digits in Social Security numbers or typos in names, she said.
“The changes will certainly benefit consumers,” said Hudson, now a lawyer with the Bailey Cavalieri firm in Columbus who represents the American Council of Life Insurers.
The state Insurance Department, meanwhile, also is trying to help.
Since 2009, consumers have been able to submit documents to the department that it then turns over to insurers to check on.
The department received 651 requests in 2012, up from 59 in 2009 as word spread about the program. Of the number last year, policies were found for 279. The state doesn’t know how much money was awarded.
“We think it’s a great tool for Ohioans,” said Jana Jarrett, the department’s consumer-services assistant.
Since 2009, Nationwide has been upgrading its processes and adding employees to review old records in search of beneficiaries of unclaimed benefits, Henderson said.
He said he expects Nationwide’s review of old records to be caught up this year. After that, the insurer will regularly review the Social Security death files to keep claims up to date, he said.
The insurer compares the death files against those of its policyholders. From there, the insurer tries to identify beneficiaries through obituaries and other sources, he said.
Finding beneficiaries of these old policies is no easy task. For starters, they may not know they were a beneficiary on a policy or may have forgotten about it. They move. They change last names.
In the case of Cheatham, Nationwide tracked her mother to the cemetery and then contacted cemetery officials about whether they had information about family members and where they could be reached.
In another case as part of its effort, Nationwide found Karen Harms in Colorado, even after she had moved and changed her name twice.
Her father, a Methodist minister, had purchased small insurance policies for all four of his children when they were kids. With the exception of one sister, the other siblings had cashed in the policies long ago.
She said she found out from police that her sister had died in Hawaii. She didn’t have much contact with her sister after they had become adults.
She said she was aware of the policies her father had bought decades ago for the children.
“I figured she already cashed it in and used it,” Harms said.
That was until Nationwide called her. The insurer had found that her father had died, that Harms had moved and her name had changed.
“It was kind of hard to find me,” she said.
The policy was small, worth around $1,200, she said. After repaying a small loan her sister had taken against the policy, Harms ended up with about $800.
“This was really an important little amount of money.”
mawilliams@dispatch.com
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