Challenges and Solutions for Life Insurance Death Data and Claims Processing

The Social Security Administration (SSA) manages the Death Master File (DMF), the only federal database that insurers must periodically check to verify deaths. However, the DMF now captures only 16% of U.S. deaths, largely due to restrictions imposed for privacy and identity concerns starting in 2011 and changes under the Bipartisan Budget Act of 2013. These limitations have led to challenges for life insurance companies in timely identifying deaths and processing claims, resulting in millions of families facing potential delays or loss of life insurance benefits. Originally designed to terminate Social Security and annuity payments for deceased beneficiaries, the DMF’s utility for life insurance claims has diminished. Insurers often lack comprehensive data for life insurance death claims compared to annuities. Additionally, some death data is scraped from over 40,000 news outlets publishing obituaries, but the variability and declining frequency of obituary postings pose further obstacles to accurate death reporting. Another significant issue is that insurance beneficiaries may be unaware of existing life insurance policies, especially with trends like industry consolidation, an aging insurance agent workforce, and embedded benefits within other products diminishing communication between insured individuals and insurers. This gap can cause survivors to miss out on entitled benefits because they do not know to file claims. To address these challenges, the National Association of Insurance Commissioners (NAIC) developed the Life Insurance Policy Locator (LIPL). This tool helps beneficiaries locate life insurance policies by submitting requests that participating insurers cross-reference with their internal records. However, the LIPL has limitations: it does not maintain a master policy database, relies on voluntary insurer participation, and is not always prominently promoted by insurers. Insurers often do not have updated contact information for beneficiaries, further complicating claims processing after a policyholder’s death. The NAIC does not compile full policy or beneficiary archives and only acts as a facilitator for the search process. There is an ongoing call from industry representatives to enhance data sharing, improve database completeness, and make policy-locating tools more effective. Potential solutions under consideration include increasing insurer participation in the LIPL, improving data accuracy and update frequency, and exploring ways to re-establish a more comprehensive and accessible death verification system. These measures aim to reduce delays, prevent lost benefits, and improve the efficiency and transparency of death verification and life insurance claim handling in the U.S. market.