Insurance Commissioner Jones, Controller Chiang Launch Investigation Into Death Payment Practices
News: 2011 Press Release
Media Contact for SCO: Jacob Roper 916-445-2636
Insurance Commissioner Dave Jones and State Controller John Chiang today announced the issuance of a subpoena and joint investigative hearing into the practices of Metropolitan Life Insurance Company (MLIC), also known as MetLife. The hearing will focus on MetLife's practices regarding payment of benefits under life insurance policies after MetLife learns of an insured's death - either to the beneficiaries or, if they cannot be located for three years or more, to the State's Unclaimed Property program. MetLife learned of the deaths of insureds through a database prepared by the Social Security Administration called "Death Master," which lists all Americans who die.
The Commissioner and the Controller are responding to preliminary findings from an audit the Controller launched in 2008, indicating that for two decades, MetLife failed to pay life insurance policy benefits to named beneficiaries or the State even after learning that an insured had died. The company has a huge number of so-called Industrial Policies, valued at an estimated $1.2 billion, which were primarily sold in the 1940s and 1950s to working-class people. The payments, which were collected weekly, typically were higher than the final death benefit. The Controller's unclaimed property audit indicates that MetLife did not take steps to determine whether policy owners of dormant accounts are still alive, and if not, pay the beneficiaries, or the State if they cannot be located.
Simultaneously, the preliminary findings show, when MetLife knew that an owner of an annuity contract - which generates income for the policy owner at the time the annuity matures - had died, or the annuity had matured, the company did not contact the policy holder or beneficiary, even though it subscribed to the "Death Master" database. Furthermore, MetLife continued making premium payments from the policy holder's account until the cash reserves were used up, and then cancelled the contract.
Today's announcement comes after Controller Chiang last week announced a landmark settlement with insurer John Hancock and following a multi-year investigation aimed at determining whether the insurance industry was in compliance with state unclaimed property laws requiring them to transfer dormant property to the State for safekeeping when the rightful owners, or their heirs, cannot be located. The Commissioner and Controller believe that these practices are not isolated, but are systemic in the insurance industry.
"The thrust of this hearing is to determine whether MetLife, one of the largest life insurers and issuers of annuities in the United States, engaged in unfair practices regarding the payment of life insurance claims to beneficiaries," Commissioner Jones said.
"California families buy insurance to provide for their retirement security and the financial security of their families when they die," Controller Chiang said. "The benefits should be paid to the policy beneficiaries or to the State to return to the rightful owners."
The hearing will be held in Sacramento on Monday, May 23, 2011, from 9:30 a.m. to 11:30 a.m.
A copy of the subpoena can be found by selecting this link.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California, regulating the $123 billion insurance marketplace. In 2013 the California Department of Insurance received more than 170,000 calls from consumers and helped recover over $63 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.