Life word attention underneath investigation
The following is a book from “Not Paid” that aired on Apr 17, 2016. Lesley Stahl is a correspondent. Rich Bonin, producer.
When we take out a life word policy, we compensate premiums in a expectancy that when we die your associate or your children will accept a benefit. But audits of a nation’s heading word companies have unclosed a systematic, industry-wide use of not profitable poignant numbers of beneficiaries.
In a little-known array of settlements, 25 of a nation’s biggest life word companies have concluded to compensate some-more than 7 and a half billion dollars in behind genocide benefits. However, about 35 word companies have not staid and sojourn underneath review for not profitable when a customer is unknowingly there was a policy, something that is not during all uncommon.
Kevin McCarty, Florida’s word commissioner
CBS News
Kevin McCarty: The customer never comes brazen since he or she doesn’t know a routine exists.
But a companies know, says Kevin McCarty, a word commissioner of Florida, who led a inhabitant assign force questioning a industry. And a companies don’t pay, he says, unless a customer creates a claim.
Kevin McCarty: And what we found is that companies have tangible believe in their files that people have died, nonetheless they have neglected to trigger an review and compensate a claim.
Lesley Stahl: So in other words, life word companies are unwell to compensate out genocide advantages when they know a chairman is dead, and they’re claiming they don’t know.
Kevin McCarty: In many cases, that has been accurately what we have found.
Lesley Stahl: When we found that, what went on inside you?
Kevin McCarty: My initial instinct was of march is unleash a hounds of ruin — let’s go after them, and display them for a unconscionable, indefensible function that was going on.
He says some of a policies are value some-more than a million dollars. But many are valued during reduction than $10,000.
As a outcome of a audits, Joseph Bigony of West Virginia recently got a long-overdue remuneration of some-more than $5,000 from his sister’s policy.
Joseph Bigony receives a long-overdue remuneration from his sister’s life word policy
CBS News
Joseph Bigony: we was a director of her estate when she died in Jun of 1990, and we didn’t know anything about this during all.
Jeff Atwater: You’re articulate about millions of policies.
Lesley Stahl: Millions?
Jeff Atwater: Hundreds of thousands of policies that we’re traffic with usually here in Florida.
Jeff Atwater is a arch financial officer of Florida in assign of controlling a state’s word industry.
Jeff Atwater: You can assume from what we have found that a policies that should have paid out in a 60s, in a 70s, in a 80s, in a 90s were never paid.
Lesley Stahl: And you’re observant it’s partial of their plan?
Jeff Atwater: After all we’ve looked at, Lesley, it would be tough to imagine. This is not a tiny dollar amount. These are billions of dollars that now stay in a investment accounts of these word companies rather than lapse income to those families.
Lesley Stahl: Tell us some of a vast names.
Jeff Atwater: It would be all a vast formula names that you’re informed with: John Hancock, MetLife, Prudential. Many of these companies have sat down with us and done right.
No one disputes that a insurers compensate out on policies when a customer files a correct claim.
But says Kevin McCarty of Florida, many of a companies customarily and deliberately overlooked justification in their possess files that a policyholders had died.
Unless someone filed a claim, he says, a companies would cancel a routine and keep a genocide advantage for themselves.
Kevin McCarty: Here’s a life word routine that’s released in Florida in Jan 2002. The insurer died in Apr of 2008. We indeed have in a word company’s file, a copy, a scanned copy, of a genocide certificate.
Kevin McCarty: And a concomitant pouch that displayed a spouse’s lapse address.
Lesley Stahl: With a spouse’s residence on it.
Kevin McCarty: It’s right here.
Lesley Stahl: Let me see.
Kevin McCarty: Less than one month after a genocide a routine was consummated for non-payment.
Industry lobbyists – like this one during a new conference in Florida — disagree that a weight falls on a beneficiaries.
Lobbyist: We all enter into contracts any day and if we pointer that contract, you’re thankful to know what’s in it.
Lesley Stahl: The companies disagree that in a policies that these people signed, it says – black and white – that they have to make a explain and uncover adult with a duplicate or a routine itself. “And if they don’t do that, we don’t have an obligation.”
Kevin McCarty: But Florida law says something too. And we have to demeanour during it not usually in terms of a contract, though to your responsibilities underneath a Florida word code. And I’m here to contend that we have a shortcoming to examine a explain if we know someone has died. And if we have a minute that says you’re deceased, we have tangible believe a chairman has died.
Insurance companies are regulated alone by any state and he says identical laws are on a books opposite a country.
State regulators initial got breeze of a word attention use from Jim Hartley and Jeff Drubner who run a record and auditing organisation called Verus Financial. Based on an insider tip in 2006, Drubner, contracting techniques he had used as an FBI agent, combed by word organisation information and detected that a insurers were customarily regulating a Social Security Death Master File – that is a constantly-updated list of people who have died in a United States.
Lesley Stahl: What was a stress to we that they were regulating a Death Master File for something?
Jeff Drubner: we knew during that indicate that they knew since if we have–
Lesley Stahl: They knew who was alive and dead, is what you’re saying?
Jeff Drubner: Yeah, since they know who they’ve insured and if they have a list of everybody that’s upheld away. we knew that they knew.
Lesley Stahl: What was a subsequent step?
Jim Hartley: The subsequent step was to pronounce to a states. There wasn’t one treasurer, one controller or one profession ubiquitous who didn’t have a greeting that this shouldn’t be authorised to occur and we have to repair it.
Drubner went on to learn that many word companies used a Death Master File usually when it was to their advantage: to cut off payments or retirement payments once a policyholder died. But they didn’t afterwards forewarn a life word side of a company.
Kevin McCarty: We have tangible cases, Lesley, where a policyholder had both an payments and a life policy. And they consummated a annuity, and of march they knew a chairman was dead, so they– so–
Lesley Stahl: Claimed over here that they didn’t know he was dead?
Kevin McCarty: Lesley, when we went in and looked during a memos, a right side told a left side and a other side said–
Lesley Stahl: And we saw it in a audits? You’d usually see it-
Kevin McCarty: We saw it in a audits.
Something else they saw in a audits associated to “whole life” word policies — that in further to a genocide advantage build adult a income nest egg, like a 401K.
What they found is that when a customer did not come forward, a organisation continued to compensate themselves premiums out of a upheld person’s nest egg.
In this $20,000 policy, for instance, a nest egg was emptied down some-more than $9,000 to zero…after a chairman had died.
California Controller Betty Yee says that kind of siphoning off was widespread in cases where beneficiaries did not come forward.
California State Controller Betty Yee, right, and Lesley Stahl
CBS News
Betty Yee: How can we not be angry by this?
She says that in about a third of a cases there was justification of genocide in a file.
Betty Yee: Here we have a policyholder.
Lesley Stahl: Is this a tangible record that we saw with a word “deceased” in large, vast observable letters–
Betty Yee: Yes, yes, “deceased” with a date of death.
Lesley Stahl: And still they didn’t– they didn’t stop profitable themselves.
Betty Yee: No, no, and we would’ve suspicion with that kind of indication, a subsequent step would be to endorse that by looking during a Death Master File and commencement a claims routine with a family member.
Lesley Stahl: And they didn’t.
Betty Yee: They didn’t.
When a income was all used adult a companies cancelled a policy. Under a law they’re authorised to compensate themselves premiums regulating their customer’s amassed income while they’re alive. Florida’s McCarty says a law was creatively dictated as a approach to strengthen consumers.
Kevin McCarty: For instance, if we have a life routine and we remove your pursuit and we can’t make your reward payment, they will take some of a income value that’s built adult in your routine and compensate a premium. Which is good for consumer protection.
But in this situation, after they died…
Kevin McCarty: we consider it’s tantamount to hidden when we know in your books and annals a chairman is upheld and we empty a policy. Now if we consider about that, if we would have explained that perplexing to sell that routine during a beginning.
Lesley Stahl: At a beginning.
Kevin McCarty: You’re sitting in your kitchen and saying, we know, you’ve got all these black of confidence and financial fortitude and we’re going to be there for we with your family in their grief, though they say, “Oh, by a way. If we hang that routine in a shoe box and hang it in your closet, not usually are we not going to demeanour for you, though we’re gonna to take all a income value in it, and…
Lesley Stahl: Give it behind to a company.
Kevin McCarty: Give it behind to a company. And leave your customer with nothing. Here, pointer here.
The 25 word companies that have staid with a states certified no wrongdoing, though concluded to compensate out some-more than $7.5 billion – possibly directly to a delinquent beneficiaries or to a states, that afterwards try to find a beneficiaries by phone…
Woman: We have perceived some supports from an word organisation that’s in your name.
Or online…
PSA: Thousands of Oklahomans are due income from life word policies.
None of a life word companies we contacted would give us an interview, though vocalization on their behalf, a attention trade association, a American Council of Life Insurers, told us quote: “most life insurers are going good over what a law requires to brand routine owners who have died and left unclaimed benefits.”
Ken Miller, a treasurer of Oklahoma, says there are still about 35 word companies that have not staid and some are fighting tooth and nail. At stake, he says, is adult to $3 billion some-more in unclaimed advantages nationwide.
Lesley Stahl: Who’s fighting a hardest?
Ken Miller: Kemper is a categorical one.
Kemper, a Chicago-based word company, has been pulling for legislation around a nation that would bar a states from forcing Kemper to go behind and hunt for delinquent beneficiaries.
When we called Kemper, they referred us to Steve Weisbart of a Insurance Information Institute — who says creation companies like Kemper compensate now would be unfair.
Steve Weisbart: If we can say, “Do something currently that we didn’t design to do and didn’t devise to do and didn’t collect income to do 30 years ago,” what else can we contend currently that they should be doing retroactively. It’s potentially an open door.
Lesley Stahl: A sleazy slope is what you’re saying?
Steve Weisbart: A sleazy slope.
Kemper has argued in justice filings that it’s never used a Death Master File to brand defunct policyholders and that anticipating and profitable their beneficiaries now would outcome in “a estimable financial loss…” and need a organisation to “…substantially change (its) business practices.”
Ken Miller: If your indication is built on a fact that you’re not going to compensate a upheld person’s desired ones for a routine that they’ve totally paid in full, to me that’s usually a bad policy.
An Oklahoma woman, Sherry Sanders, didn’t know about her husband’s routine until about a year ago, when – since of a settlement, she got a check value $22,000. We asked Oklahoma Treasurer Miller how many an word organisation can make by holding on to a $22,000.
Ken Miller: Well, Lesley, now you’ve strike on something that’s a many critical issue. And that’s a time value of money. Because that’s what this is all about. This is about money. That $22,000 invested for 50 years during an 8 percent lapse becomes $1.2 million.
Lesley Stahl: That a organisation gets since it sat there?
Ken Miller: And that’s usually one tiny policy. If we enhance that over all a policies that’s usually due to my state, it’s a extensive volume of money, billions and billions of dollars.
The American Council of Life Insurers says that a attention has paid out some-more than $600 billion in genocide advantages over a final 10 years – so a companies are doing a good job.
Ken Miller: we don’t consider we should pat ‘em on a behind for doing what they’re ostensible to do.
Lesley Stahl: But a companies contend that this is usually 1% of a life word policies.
Ken Miller: Then because quarrel it? If it’s so inconsequential, if it’s such a tiny amount– afterwards because be spending your repute to not compensate upheld people’s desired ones income that’s justly due them.
