Enhancing Death Claims Verification in Life Insurance
Life insurance regulators are being urged by industry experts to enhance procedures for verifying death claims, amid concerns about the federal Death Master File (DMF) potentially missing numerous annual deaths. Richard M. Weber, with nearly six decades in the life insurance sector, informed regulators that the DMF currently captures only about 16% of deaths in the United States. This issue was a focal point at a special meeting of the National Association of Insurance Commissioners’ (NAIC) Life Insurance and Annuities Committee.
The central concern is whether the current practices for identifying deceased policyholders and communicating with beneficiaries require updating. According to Weber, the DMF's coverage has diminished significantly after the Social Security Administration removed over 4 million records from public access in 2011. Additional data access limitations were put in place by the Bipartisan Budget Act of 2013.
Weber suggested that insurers might remain unaware of many deaths unless claims are filed by family members or through the NAIC's Life Insurance Policy Locator service. This tool, in operation since 2016, allows consumers to input information that is compared with insurers' records to find potential matches, although it does not independently track or verify deaths.
Addressing Data Access Limitations
In collaboration with Kathy Belfi, a former financial regulation director, Weber proposed that the NAIC draft a new model regulation. This regulation could require insurers to utilize additional data sources, such as state vital records and obituary notices. Recommendations also included conducting monthly checks instead of semiannual reviews and reducing beneficiary search times from 90 to 60 days.
Currently, there is an inconsistent adoption of unclaimed life insurance requirements across states, with only about half implementing a version of the National Council of Insurance Legislators' model law. This has led to varied levels of consumer protection.
Leah Walters from the American Council of Life Insurers emphasized that the industry aims to fulfill its obligations to pay out benefits. She highlighted that 38 states have adopted the model or their own unique DMF search requirements, adding that since its inception, the NAIC's locator service has revealed more than $13 billion in due benefits.
The discussion recognized the effectiveness of the locator tool but also noted concerns over regulatory consistency. While the meeting concluded without specific plans, potential further discussions at future meetings were suggested by Iowa Insurance Commissioner Doug Ommen.