News: 2011 Press Release
For Release: May 23, 2011
Media Calls Only: 916-492-3566
Insurance Commissioner Jones Announces Examinations Of Life Insurers In California Over Alleged Non-Payment of Benefits
Market conduct examinations to focus on top ten insurers’ potentially unfair practices in handling of dormant policies
Insurance Commissioner Dave Jones announced today the initiation of Market conduction examinations of the ten largest life insurance companies doing business in California. The announcement came during a joint investigative hearing with Controller John Chiang into the payment practices of Metropolitan Life Insurance Company, also known as MetLife. The market conduct examinations, as did the hearing, will focus on whether life insurers failed to pay life insurance policy benefits to named beneficiaries or the State even after learning that an insured person had died.
The ten insurers subject to the market conduct examinations are: Metropolitan Life Insurance Company (MetLife), Hancock Insurance, Prudential Insurance, Nationwide Insurance, The Hartford, Sun Life Financial, New York Life Insurance Company, The Lincoln National Life Insurance Company, Aegon Group, which includes Transamerica, and Pacific Life Insurance Company. Commissioner Jones is conducting the investigation jointly with State Controller John Chiang.
"The goal of these examinations is to determine whether the insurance industry has engaged in unfair practices in the payment of death benefits under life insurance policies and annuities," Commissioner Jones said. "Insurance regulators and state controllers across the country are examining life insurance companies to understand whether they are using information they have that indicates a policyholder has died and whether they are paying out benefits appropriately. Initial information from publicly available sources suggests some troubling practices in this area, and we intend to get to the bottom of appears to be a very troubling trend."
Based on preliminary findings, life insurers receive detailed information about the death of their policyholders from a database prepared by the Social Security Administration called "Death Master." Insurers use Death Master for a variety of purposes. However, a critical issue is whether some insurers use Death Master to cut off payments on annuities when an annuity owner dies but do not use that information to identify life insurance policyholders who died and pay their beneficiaries.
Market Conduction Examinations
The California Department of Insurance conducts examinations of insurance companies to be sure that the companies are in compliance with the California Insurance Code (CIC) and the California Code of Regulations with respect to rating, underwriting and claim practices. These are called market conduct examinations. Exams can be scheduled based on consumer complaint activity, special requests, or at regular intervals.
Market conduct examination reports document the findings of our examiners. The reports identify the size of the policy sample or claim sample that was reviewed by the examiners and indicate any alleged violations of the law discovered during the exam. The reports also summarize actions taken by the insurers to correct the alleged non-compliant practices. The public reports of examination available here contain alleged violations of CIC Section 790.03, Prohibited Acts, and the Fair Claims Settlement Practices regulations. In some cases, the examinations serve as the basis for a formal legal enforcement action against an insurer.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California, regulating the $123 billion insurance marketplace. In 2012 the California Department of Insurance received more than 160,000 calls from consumers and helped recover over $64 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. Out-of-state callers, please dial 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.
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