Sun Life Settles Death Master File Case for $3.2 Million
November 14, 2014 by Jeff Jeffrey
TALLAHASSEE, Fla. – Sun Life Co. has agreed to pay $3.2 million to settle a multistate investigation into the company’s use of the Social Security Administration’s Death Master File to settle life insurance claims.
Investigators alleged Sun Life searched the Death Master File, which contains the names of all deceased individuals with a Social Security number, to stop paying a deceased person’s annuity but did not use the same information to find and begin paying the deceased’s family or other beneficiaries for life insurance policies.
Under the terms of the settlement, Sun Life has agreed to compare all company records against the DMF update file every month and against the complete DMF file each year to identify matches for potential unclaimed death benefits. Sun Life must also provide quarterly reports about its efforts to implement the terms of the settlement agreement for 36 months following its conclusion.
Finally, the company must agree to a follow-up examination by the Florida Office of Insurance Regulation to ensure it is complying with the agreement for 39 months after the settlement is concluded.
The role of the Death Master File in how insurers pay life insurance benefits has been at the heart of a nationwide investigation into whether insurers have acted appropriately when paying beneficiaries. Some regulators have accused life insurers of not going far enough to determine whether they had outstanding obligations to pay beneficiaries when a policyholder had died.
To date, 14 life insurance companies have agreed to settle cases involving their use of the Death Master File. The national effort to crack down on how they use the file has resulted in the return of more than $1 billion to beneficiaries and more than $1.7 billion delivered to the states’ unclaimed property bureaus, according to OIR.
State insurance regulators have either reached settlements or concluded the investigation of 16 of the top 40 companies constituting 60% of the total market. The other 24 life insurance companies continue to undergo evaluations of their policies for searching the Death Master File, OIR said in a statement.
In Florida, the question of what duty life insurers have to search the Death Master File was complicated by a state appellate court decision handed down in August.
The Florida First District Court of Appeal ruled life insurers do not have an “affirmative duty” under the state’s unclaimed property law to search death records to determine whether a policyholder has died. The court also determined life insurance proceeds are not “due and payable,” and the dormancy period does not begin to run, until the life insurance company receives proof of death (Best’s News Service, Aug. 22, 2014).
Sun Life Assurance Co. of Canada currently has a Best’s Financial Strength Rating of A+ (Superior).